Good day everyone. Welcome to the Third Quarter 2017 Earnings Call of Everest Re Group Limited. Today's conference is being recorded. At this time for opening remarks and introductions, I'd like to turn the conference over to Ms. Beth Farrell, Vice President of Investor Relations. Please go ahead.

Thank you, Jennifer. Good morning and welcome to Everest Re Group's third quarter 2017 earnings conference call. On the call with me today are Dom Addesso, the company's President and Chief Executive Officer; Craig Howie, our Chief Financial Officer; John Doucette, President and CEO of Reinsurance Operations; and Jon Zaffino, President of North American Insurance Operations. Before we begin, I will preface our comments by noting that our SEC filings include extensive disclosures with respect to forward-looking statements. In that regard, I note that statements made during today's call, which are forward-looking in nature, such as statements about projections, estimates, expectations and the like are subject to various risks. As you know, actual results could differ materially from current projections or expectations. Our SEC filings have a full listing of the risks that investors should consider in connection with such statements. Now, let me turn the call over to Dom.

Thanks, Beth, and good morning. Let me begin by first extending our sympathies to all those affected by the recent events. Community at large has responded to the relief efforts, but still there is more that can be done. I'm especially proud of the way our organization has responded on both the business and personal front. We have advanced moneys to our Reinsurance clients, so they in turn can quickly settle with their insurers, allowing them to start the process of rebuilding our lives and businesses sooner. On the insurance front, our claim staff is working diligently to do the same. These events teared us with many personal stories, but also remind us of the value that our industry and company can bring during times like this. We protect against volatility and therefore expect the periodic loss that we will discuss this morning. This means, of course, that during times of limited catastrophe loss activity, we should be able to produce strong results. It also means that after a series of events that claimed $100 billion from the system, there needs to be a reset in the market as we reevaluate pricing, terms and conditions, and the impact the recent years softening has had on the industry's risk-adjusted returns. For this reason, we believe that these recent events will lead to a general market firming across all lines and territory. In non-loss affected areas, the push will be to achieve adequate return levels over a reasonable timeframe. Events like these create a greater awareness in the market around the cost of capital and the price of risk. For those regions affected by loss, the price reaction will be more pronounced. This will start with the retro market since it is heavily supported by the collateralized market, whose capital is in…

Thank you, Dom and good morning everyone. Everest had a net loss of $639 million or $15.73 per common share for the third quarter of 2017. This compares to net income of $295 million dollars for the third quarter last year or $7.6 per diluted common share. The operating loss for the quarter was $16.43 per share reflecting the catastrophe losses in the quarter and the foreign exchange losses of over $1 per share, which is the primary difference from the consensus. The operating loss excludes realized capital gains and losses. You will note that 2017 earnings per share calculations utilized basic common shares instead of diluted shares, due to the loss in the quarter and on a year-to-date basis. The group had a net loss on a year-to-date basis of $102 million compared to $623 million of net income in 2016. These results were impacted by a series of major catastrophe events that are driving both the quarter and the year-to-date figures. In the third quarter of 2017, the group saw $1.2 billion of net pre-tax catastrophe losses, with a net economic impact of $900 million after taxes. The breakdown on the pre-tax loss by event is as follows. Hurricane Harvey was $270 million, Hurricane Irma was $475 million, Hurricane Maria was $400 million, and the earthquakes in Mexico were $85 million. There is considerable uncertainty in these estimates, and we expect it will take several months before relative clarity emerges from the multiple events. However, the company has significant unused retrocessional capacity, including aggregate protections, which would provide coverage above these estimated levels. On a year-to-date basis, the results reflected net pre-tax catastrophe losses of $1.3 billion in 2017 compared to $143 million in 2016. Excluding the catastrophe events, the underlying book continues to perform well with an…

Thank you, Craig. Good morning. As a leading global reinsurer, we have consistently achieved industry-leading results in periods with low catastrophe loss activity. But the true test of our franchise and business strategies is our ability to demonstrate resilience in a quarter in any year with several major catastrophe losses or other large unusual shock losses. While some characteristics of the recent property loss activity were unusual, the magnitude of insured losses was well within our expectations, owing to our proactive and comprehensive risk management efforts. Learning from other large catastrophe and sharp loss years such as 2001 World Trade Center, 2005 Katrina Rita and Wilma hurricanes, 2008 Global Financial Crisis and 2011, a string of losses including earthquakes in Japan and New Zealand, floods in Thailand and Australia and severe convective storms in the U.S. We have continually enhanced and refined our group-wide enterprise risk management framework. This includes our large risk and catastrophe strategy, across all underwriting areas within the company. And now, both our reinsurance and insurance portfolios, each are expected to benefit from the post loss market condition. This applies across our underwriting risk spectrum, from property insurance to facultative, to proportional treaty, to property catastrophe access of watch treaty and ultimately, to retro. We believe it is essential that a global industry leading specialty reinsurer and insurer, such as avarice. Truly understand its risks and develop a comprehensive resilient business strategy that allows us to stand with our clients, while protecting our investors capital, a proactive, farsighted approach is critical to the continuity of an enduring franchise. Expect the unexpected, as every loss is different and unique. This includes relentless preparation for Black Swan and other tail events for an accumulation of varying losses across multiple lines of business. Everest continues to be well-positioned to…

Thank you, John, and good morning. As catastrophic events unfolded in the third quarter, particularly of the magnitude at scale that occurred across North America, the resulted impact to the primary insurance market has been predictably quite significant. While the Everest Global Insurance operations were not immune to the impact of this widespread devastation, the performance of our various books of business, notably our U.S. property portfolio were in line with our expectations. Further, we are pleased with the continued growth and development of our global insurance platform. We are increasingly confident that our vision to organically build a world-class diversified insurance organization that is relevant within the global specialty P&C industry is being realized. Our leading gross written premiums, our enhanced operating platform, the many new product launches, our successful talent acquisition strategies and our growing relationship with a diverse group of trading partners is a testament to this approach. Progress on our journey is also fairly measured by an increasingly resilient underlying combined ratio, which again was solidly profitable for the quarter. Notably in the quarter, we were pleased to receive conditional approval from the Central Bank of Ireland for our newest European operating platform Everest Insurance Ireland. This is another example of the thoughtful organic build of our franchise and the expansion of our global underwriting operation. Our Irish operating companies will be an important component of our overall international insurance strategy, and is an excellent complement to both our North American and Lloyd's operation. I'll turn now to the financial highlights in the quarter, following this I'll provide some comments on the cat activity experienced within the insurance operations along with our views of the operating environment forward. As in prior quarters, due to the divestiture of Heartland in late third quarter of 2016, I will…

Thank you, Jon. Jennifer, we are open for questions at this time.

[Operator Instructions] We'll have our first through Elyse Greenspan with Wells Fargo.

Hi, good morning. My first question just going back to your introductory comments, when you pointed to marking farming across all lines in territories. I just, if we can get more color on you know, I mean, if – is this depending on alternative capital, reloading or not reloading following the events, I guess, how do you see the dynamics underlying the market firming as we get closer to the January 1 renewals?

Well, there's a number of factors, Elyse, that lead us to believe that there is an [ph] opening market (33:42). First of all, starting with the various industry events that clearly we have been attending throughout the past month starting with Monte Carlo and moving on to PCI and Baden and the CIAB. The strength of the market in terms of [ph] its resolve (34:01) continue to increase based on our assessment and various talking with customers, brokers, [ph] and other markets (34:09). So, that's number one. And underpinning all that has been what I've been saying for some time is that the returns on capital, return on equity of the industry in general, as you all know, has been in the mid single-digit for a period of time. And therefore, these types of events are unsustainable with mid single-digit ROEs in times of low to no cat activity. So, clearly, the market has been below technical pricing adequacy. So, that's number one. With respect to alternative capital coming back in, start off with a good portion, a significant portion of alternative capital is locked up. And it's our belief that certainly some new capital will come back in, but it's not clear yet that 100% of that, at least in the short term, is ready to move back in. And frankly, alternative capital is not going to come back in unless it sees some price improvement. So, that's my fundamental belief as to why I think there will be a market firming. I don't think it's dependent on alternative capital. There's technical pricing needs across many of our lines of business, not just property, and there has been a reassessment of cost of capital [indiscernible] (35:49)

What level of rate do you think we could see on both loss and potentially non-loss impacted accounts?

I knew we would eventually get to that question, and I'm not necessarily going to say that we're expecting X percent by this timeframe. I think we will see in the retro market a very, very strong double-digit rate increases early on, and perhaps that would last into a second renewal season. That of course, as you know, with firm retro pricing that has a waterfall impact on the rest of property cat. We're already, as Jonathan somewhat alluded to, on the primary side. It's mixed, early days, but we are seeing – beginning to see some price movement upward, but that will take a longer period of time to get to what we believe will be rate adequacy. So, at the primary level, ultimately, it's in the early days, it's high single-digit, but that might take several months to really play out. On the reinsurance front, straight up property cat, I think will start in the teens, again in loss affected areas and perhaps that will take multiple years to play out. But it is – we don't know for sure, but clearly, we are approaching the January 1 renewals with the anticipation that rates are going up.

Okay. Great. I appreciate the color. And then, also if you could talk about the potential implications on the tax side if [ph] the NIL bill (37:34) is included within tax reform?

Potential implications to the industry to us? What is – where is the...

For Everest, sorry. For you guys specifically.

There is many derivations of that. We have various companies that are in place obviously in the U.S., in Bermuda, in Ireland, in other jurisdictions and we have capital in most of those locations. So, depending on what the final shape of that bill is, we'll dictate where we position our capital and what companies we will be running business on.

Okay. Thank you very much. I appreciate the color.

Thank you.

We'll go next to Kai Pan with Morgan Stanley.

Thank you, and good morning. First question, just a follow-up on Elyse's question on alternative capital. How much was the total losses for Mt. Logan and what's your investors sort of risk appetite after those events?

Let me ask Craig the total loss for Mt. Logan.

The total loss for Mt. Logan was almost $200 million. And then, of course [indiscernible] (38:57) income as well. So, you'll see that there, AUM is down about $116 million for the quarter.

And then, I'm sorry the second follow-on to that, Kai, was?

What are the sort of your – the investors in Mt. Logan, what's their risk appetite following these events?

We have and have had actually before the events but even after the events, we have investors that are ready to put capital in. Some reload, some new investors that are interested in going forward with the Logan platform, all with an expectation that rates are going up. That kind of relates back to my earlier response to Elyse.

Okay. My second question is that [ph] you sit at about (39:48) 10% of your reinsurance premiums, about 20% of your insurance premiums. I just wonder if the retro or reinsurance rates going up [ph] some (39:56) double-digits, how would that impact your sort of underwriting strategy [ph] in term of net growth (40:02)?

John?

Good morning, Kai. It's John. So, I think there's a lot of dials that we look at both in terms of absolute and relative rate adequacy. So, we'll look at it both on the growth side in terms of how we're going to deploy the capital to which area, which product line, which territory, and then how much we want to deploy. So, how much we want to deploy and how much we want to retain, that will be a function of what we think would be overall rate adequacy is. And then, yes, we will look to the different hedges whether it's additional hedges of reinsurance and retro. But remember, we have a lot of dials to turn on how we get the business, as I mentioned, from insurance, reinsurance, all the way to retro. And we have a lot of different dials to turn in terms of how we manage our net risk appetite and net risk exposure. And those include Mt. Logan that takes shares of different pools of risk and stand with Everest on whatever the rates are that we get, and as well as the catastrophe bonds that we have where we have $2.8 billion of multi-year aggregate catastrophe bond, most of which [indiscernible] (41:27) vast majority of that is still intact going forward into January 1 and later.

To add to that, to pick up on something that John has alluded to there, keep in mind that what we have been doing through the market cycle here is the market had been softening over the past couple of years, we've been moving attachment points, and deploying our capital to where we felt was the best risk-adjusted returns. And where we will be going forward, perhaps we'll be changing that again so that where the market is getting the appropriate rate increase and where the best risk-adjusted returns are is where we will be deploying our capital. So, that could change over the next 12 months.

Okay. If I may, the last question is a quick one on the tax rates. So, what's the expected tax rate for the first quarter, will it be normalized like 11%, 12%?

I mentioned in my script, Kai that I believe the tax rate for the fourth quarter, any income earned in the fourth quarter should be at an effective rate of about 10%.

Great. Well, thank you so much.

Thank you, Kai.

We'll go next to Jay Gelb with Barclays.

Thanks very much. I know you mentioned the view that the third quarter catastrophe losses were within your risk parameters. Was there anything coming out of your after – accident reports in the third quarter that ever possibly could have done different or better, looking back on these catastrophe losses?

There is always things around the edges that you can improve upon. There's nothing material, but stands out. I guess in the very extreme and the absurd, could have been no property cat. That's obviously not a realistic scenario. I have to be honest with you, I think what we have done and the way we've managed our portfolio I think has been pretty much spot on, as again during the – over the last couple of years, as you know, we've been earning very, very good returns on our capital. We've been leveraging the retro market, the capital markets, and allowed us to maintain our writings while not diminishing our returns on capital. And the loss, frankly, has come out well within our parameters. So, there's not really – I suppose the only other thing that we could have done is again Monday morning quarterback, buy more reinsurance for our insurance portfolio. But looking at it from this vantage point, I'm certain we would make the same decisions.

Thanks, Dom. And using that is kind of as a starting point for the next question. The combined – [ph] the account of your (44:50) combined ratio in the third quarter in the insurance business, over 140%, is – what can be done differently there to bring this to obviously not in 2017, but in 2018 and beyond, bring this to a calendar year underwriting profit for the business?

Well, I mean that combined ratio that you cite includes the catastrophe losses. So, are you talking attritional, are you talking all-in?

All-in. I mean, looking out into next year, it's been a number of years I think since the insurance business has generated underwriting profit.

Well, on an attritional basis, it is generating an underwriting profit and we see the improvement in the attritional combined ratio year-over-year. So, we are moving in the proper direction. We view our cat book, we view on a corporate or global basis. So, when we are allocating capacity, when we're looking at the marketplace, we're looking at our cat exposure globally and I should say corporately. So, that was well within our risk appetite. To the extent that it is, then we could certainly entertain some intercompany reinsurance opportunities that would, in effect, manage that combined ratio perhaps to the point that you're describing. But overall, we are very confident and very pleased with the attritional performance of our book.

That's helpful. And then two final quick ones. One, any perspectives on exposure in the fourth quarter from the California wildfires? And then separately, since the company is more focused on deploying capital in the business, should we kind of zero out the potential for share buybacks going into next year?

As you know, we don't – let me answer the wildfire question first. At this point, it's fairly still early, but the losses we've modeled it and what we're hearing from customers and underwriters is that it is well within our normal quarterly cat load. So, we're not concerned about that event at least at this point. Relative to share buybacks, as you know, we don't give an indication of what our appetite is. We are in the process of just reformulating, if you will, our plans for next year and we'll have perhaps more to say on that in the weeks and months ahead.

Appreciate it. Thank you.

Thank you, Jay.

We'll go next to Josh Shanker with Deutsche Bank.

Yes. Good morning, everybody.

Good morning, Josh.

So, I want to square if talks about improving pricing was also your appetite for growth. Compared to many of your peers, you have found opportunities in this marketplace where others haven't and you grew very nicely in this third quarter as well. If someone says look, if there's attractive opportunities, prices maybe doesn't need to go up or how do I square those two things?

Well, is your question on the reinsurance front or the insurance front?

Well, you can [ph] talk both (48:13) I mean, clearly, the insurance book is obviously growing faster, but you're also finding I guess in financial lines, you found opportunities in reinsurance which is obviously not property. But there's a lot of – not just you [indiscernible] (48:27) pricing has to go up. But here's Everest and I respect your work and whatnot, and you guys are finding opportunities very helpfully, I think, or maybe I'm not reading it correctly.

No. So, in part, the reinsurance growth is – remember we took on a crop reinsurance portfolio, so the growth is coming from that. Mortgage has been growing as well. And then, few property – or few pro-rata deals have added to that as well. And some our structured products there, our structured solutions group has been adding some premium as well. Our straight up property cat business has not really grown all that much year-over-year and that's frankly because of softening market, moving attachment points, all those things in the mix have kind of capped out kind of our appetite on property risk, cat risk.

Yes. Yes.

Does that – I don't know if that...

And so, as you're adding on business in the primary insurance book, is that business dependent on the industry having cheap reinsurance on the property side to allow you to grow there?

Absolutely not. And as Jonathan pointed out in his opening comments, we expect the non-property lines actually to grow a little faster in the coming quarters. So, you'll see even a better balance between property and non-property.

And, okay, I will try and dig a little deeper on that. The other question, obviously you guys bought more protection throughout the year, lowering your PMLs, but we never really got any numbers to that. Is there any color you can give us on where your PMLs stand now versus where they stood at the beginning of this year?

Josh, it's John. Yeah. I mean, I think they were basically materially similar. There was a decrease due to the cat bonds that we issued in the March and April time period. But part of that, and we continue to use third party capital as a way to think about managing our portfolio, managing the overall risk appetite, shaping it. And so to the extent that we had some additional capacity through the aggregate catastrophe bonds that we purchased that covered Texas, Florida, and Puerto Rico among other areas, that helped us in terms of then as we went into June 1 and July 1 in terms of the renewal period to maintain a net PML position that we were comfortable with.

Okay. Well thank you for all the color and good luck with this renewal season.

Thank you, Josh. Thank you.

We'll go next to Amit Kumar with Buckingham Research Group.

Thanks and good morning, and thanks for the questions. Just two questions. The first question is the discussion on the catastrophe bonds, and I think what I heard was they didn't kick in. Can you remind us, and I know they all have different attachment points, what do the industrial losses need to get to for your cat bonds to trigger?

Good morning. So the catastrophe bonds, some of them we purchased, so across the $2.8 billion there was several layers, different [ph] parallel (52:14) covers. They all cover North America in some fashion and Puerto Rico, several of them. And then some of them are on an occurrence basis and including the most recent $1.25 billion as well as some of the previous ones are on an aggregate basis. So these bonds that we purchased are typically done tied to industry losses, and then there is different market shares that are applied as per the bond. There are different market shares based on territories that are exposed, so there's not really a simple answer to that question. So the market shares in each of the bonds in each of the territories will vary as we try to shape the bond to then best hedge our overall portfolio. So the most latest catastrophe bonds of the $1.25 billion that we issued, they are done on an industry basis so people such as yourself can do your own research on whether you think they're expected to be penetrated or not. There had been some markdowns in the bonds that reflected that there may be some potential penetration to the lowest layer, but that really is going to end up being ultimately up to what the final industry losses are going to be.

Got it. That's a fair point. Yeah, it's a bit tough to figure out with the weighted index attachment. The second question I had was, I guess, a discussion on the missing industry losses, and we've sort of raised this topic on other calls as to how do we get to the industry loss of $100 billion-plus versus the current addition of the disclosed losses. If the industry loss were to move downwards, does your net loss move up? Can you just help us understand that metric a bit better?

No. As the industry loss moves down, you're expecting our loss to go up? Is that what you asked?

No, I was thinking about the recoveries, at what level they trigger in. That's what I was asking, sorry.

Our net loss contemplates recoveries from the various instruments that John has just kind of outlined. Which does mean that if the industry loss goes down, our net loss position really doesn't change a whole heck of a lot.

Got it.

There is some movement that could occur, but it all depends on industry loss, where the loss is coming from, what the weightings are. So it's a little difficult to give a precise answer to that, but my point is that there shouldn't be – within a band, our net loss position doesn't change a whole heck of a lot. It's really...

And, Dom, just to your point...

And staying on the other side, which is if the losses go up because of the various protections, including the aggregate catastrophe bonds I was just talking about which are very close to the aggregate retention being exhausted or slightly into the first layer, it also means that if the industry losses go up then our net loss position won't change materially.

Fair point. And Dom, any view on this, I guess, the missing billions of industry losses. I mean, obviously we're talking about rate firming. You're quite positive on the market scenario. [indiscernible] (56:06)...

Now all you smart folks have been exploring this and asking managements on all the calls and have been looking at it for weeks and you can't find it, I don't know how you expect us, a simple man like me to figure that out for you. But if there was a place to look, I would look in the capital markets piece. That's my expectation of where kind of the missing numbers are.

Yeah, that's a fair point. That's all I have. Thanks for the answers and good luck for the future.

Thank you, Amit.

We'll go next to Meyer Shields with KBW.

Thanks. I had to two big picture questions and then one more number-specific. So Dom, I was wondering, one, if you could give us a sense of third party investor elasticity, in other words how various levels of rate changes might affect the supply of third party capital And secondly, whether based on your experience it makes sense to hold back some capital from 1/1 renewals in anticipation of better rate changes later in 2018?

Two great questions. Third party capital is looking to come back into the space where what I would call reload if it can get meaningful rate increases, and the definition of meaningful can vary by company, it can vary by investor. Do I see a material increase in third party capital if we have some level of market firming? I do not. I think first, the capital has to be reloaded, and I think what your question was implying was is the third party capital going to increase materially if there is some material increase in pricing. We don't see that just yet. I also think that the other side of the equation is that, and what we've heard from some clients, is that they're more interested in potentially increasing their purchases from rated paper as opposed to third party capital. The whole issue of reinstates are always a problem there, and so there does seem to be an increased interest in rated paper. Now, that doesn't mean by the way that reinsurers like ourselves, which utilize third party capital and see it as an opportunity to expand our capital base, wouldn't increase. But to the extent that it does allow reinsurers to perhaps increase the participations of clients directly as opposed to have those clients buy from third party capital, we think that might represent an opportunity certainly in the medium-term. In terms of holding back capital, we're in a marketplace. We have customers and we have sufficient capital and/or access to capital that, well, we can trade forward or trade in a bigger way if rates are even firming more into the year. I think that the fundamental question is we won't be deploying capital unless it meets our risk-adjusted return hurdles, so that's the first test. And if it meets our hurdles, and we would anticipate it would probably even, in some circumstances, exceed our hurdles, then we would deploy the capital, and there isn't a need to hold back capital in that regard. Does that answer your two questions?

It does, certainly well. Thank you. Follow-up, or not follow-up, but within the insurance segment, I guess, both last year and this year the attritional loss ratio was higher in the third quarter than it was in the preceding two. And I was wondering is there some element to seasonality or is that just a lucky draw?

In any one particular quarter, there's adjustments we're making to pick loss ratios. Our A&H book of business for example has been growing which, by definition, carries a little bit higher attritional loss ratio. We think it's more appropriate to look at the year-to-date performance since it takes out some of those quarterly anomalies which makes the business – where we're pegging loss ratios in any one particular quarter, we make adjustments in a quarter. But it's the year-to-date number that really is what we think and what we look at predominantly, and that's improving year-over-year. That's trending in the right manner.

Yeah. Absolutely. Thank you very much.

Thank you, Meyer.

And we'll go to our final question from Brian Meredith of UBS.

Yeah. Thanks. A couple of quick questions here for you, Dom. The first, I'm just curious. At Mt. Logan, how much collateral do you expect to be tied up at the 1/1 renewals and do you plan on kind of replenishing that with new money here on that?

Do it, John.

Yeah. It's John. So the amount that would be tied up would be consistent with the expected losses that are there plus a buffer that would be on top of that against the ceded losses. And then in terms of how much we would look to raise or redeploy, we're in the process of talking to Logan investors, both existing and new ones, and we would expect – we don't know what the final number will be, but we would expect it to be up.

Got you.

And those investors, to make it clear, are looking also for rates to be up, and they're not looking to deploy capital in a flat to down market.

Right. And it allows, as Dom said earlier, there clearly is a trend in the buyers both in the reinsurance and retro market looking for rated paper because there are some fundamental structural problems which we're going to see it's going to play out in real time because with the collateralized products. In terms of collateral release mechanisms, forced collateral release, people may realize they thought they had cover and then they don't have as much cover as they thought or they don't have continuity of cover from one year to the next as collateral gets trapped. So there's a clear demand for rated paper. And with our balance sheet, our ratings, and kind of our 45-year trading relationship with clients the around the world, expect to be in a good position to capitalize on that. And so part of that would be to make sure that we get the right net risk position to be able to use our different capital structures, such as Mt. Logan, to help. But basically, if Everest gets raised, the Mt. Logan investors will benefit from that, so we stand pari passu with them.

Right. That's great. And then I'm just curious. Given history has kind of shown that on the property cat line rate increases tend to be fairly short-lived. Not sure if you expect that this time around. But given that, would you expect to potentially disproportionally put more into Mt. Logan or some type of a soft capital facility to kind of help manage that risk?

I think, we have demonstrated over the last couple of years that we deploy our capital in the best risk-adjusted areas. We have used third party capital. We will write the business on the basis that we think is best for the organization and use the capital that's out there in the most highly efficient manner possible. So it's difficult to answer that question precisely, but I think what we've demonstrated is that we're flexible and we tend to be within ranges, opportunistic, and we move our capacity around. And we will continue to do that as we trade forward if what you're suggesting is that the firming would be short-lived.

Great. That's great. And then one last one. I'm just curious. So John and Dom, I appreciate your point about the industry, kind of cost of capital going up here. But do you think that the kind of cost to goods sold for property cat reinsurance based upon models and stuff is also going to rise here and it's going to drive some of this rate activity or do you not see that happening?

I'll ask John to address that.

Yeah. So I think a lot of times – every time a loss happens there's always something that the different vendors learn from, something different than before and they adjust it. That typically takes a few years to ripple through the system as they update their models to kind of fit the historical events set or the different events that happen. So certainly, I think take what happened in Houston, I think there's going to be a heightened awareness to flooding risk in different ways than people. Certainly, some of the vendor models had thought about it before. But this is true with the different earthquakes, whether it was the New Zealand earthquake or the four zones on the Japanese earthquake. It's been a long time since a catastrophe of that size hit, Maria, and I think the modeling agencies will think that through. And for a little while there, we were looking at a Cat 5 hitting Miami, and I think that will both change some customers' views of their risk management as well as potentially change some of the vendor models with that as they think about the possibilities with the different storm tracks. But a lot of that takes a – the customer views may be more – happen in real time as people think about what board of directors for some of our clients think about what their risk position is and how much they want to keep net, and that may put some upward demand on reinsurance. But in terms of the modeling agencies, it usually takes a little bit to go through the system.

Great. And then...

Bottom line, Brian, I think the models are great. Everyone in the industry uses them. Events like this I think caused all managements to take them with a little bit of grain of salt and recognize that there is risk that is not evidenced through the models, and that in fact will have some impact on pricing, will have some impact on buying behavior as well.

Great. And then kind of just one quick numbers question for Craig, let him do some talking here. In the operating expense line, was there any kind of reversal of maybe variable incentive comp that happened?

Yes. We did that this quarter as well, Brian, just because of a matching with the events. But that'll be determined again in the fourth quarter depending on where we stand with respect to income in the fourth quarter.

Great. Thank you.

I'm glad Craig was able to be able to respond.

That's right.

That's it. Okay. So we've had all our questions, and thanks for those. In summary, I think what you heard this morning is that our risk management practices have contained the losses within our expectations, and that kind of permits us to trade forward and participate fully in what we believe, and I think the market believes, there will be firming. We think this is true not only because of what markets in general are saying but also because there will be some dislocation of capital which, as I said before, will benefit highly rated papers such as ours. So this is the business we're in but this does create some opportunity for us going forward. Well thank you for your participation on the call and I look forward to our continued dialog. Happy Halloween.

This does conclude today's conference. We thank you for your participation.