Exor N.V. (AMS:EXO)

Investor Day 2017

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May 10, 2017

Good afternoon. I'm very happy and grateful for all of you to have come today here in Turin and also from very far away. This is opportunity that we have really on the back of the successful redomiciliation that occurred last year of XOR to have a moment to spend time with our investors who have been giving us a lot of trust in the last years and really to have a moment of reflection on what we have done and also to share our direction. The big today, the real big news and story is around Partner E. And so Emmanuel and Mario will really tell you more in details, which has been so far a good story. And we've been a very happy owner of Partnere since we closed in the spring of 2016. It's also good to see Mario and Torino because he left us then to join Emmanuel and to become the CFO of Partner Re. And I think they've been a very good team, and they will tell you more about that. What I wanted to do today is start by sharing some of our history. We chose to be here today, which is a very symbolic place for my family. This used to be the house of my great great grandfather, the founder of Fiat. And we decided last year as we celebrated his 150th anniversary and the 50th anniversary of our family foundation, who was done after him, the Agnelli Foundation, to rebuild his house, to host the family foundation, but also to create a place where we could enable innovation and entrepreneurships, which was really what he, as a founder and to some extent, a disruptor than when transportation was done with horses, really did and lived up to. And so the place you are here is a place where we really are hopeful that through what the foundation is involved, which is education, but also by enabling companies and with the partnership we have with Talent Garden to really be able to start, grow and invent new things, this will enable to have a much stronger entrepreneurial culture here, especially around technology and innovation. But going back to history, we have over a century in business since the foundation of Fiat. In reality, what is interesting and I learned some time ago, already the ancestors of my great grandfather very talented business man, and his grandfather had already multiple interest in the region and in the country. We have had more than a century of owning many businesses. And would probably say that we've been close to these businesses in good times and in not so good times. But all these businesses have done overall well. And we've also been very clear about our responsibilities as custodians and owner of these many companies. To go back to our recent through in this decade has been a big exercise of simplifying our world. So we used to be a very complex universe with 5 different holding companies. And we have worked to simplify ourselves, which has given benefits in terms of transparency, in terms of governance and also in terms of overall costs. And today, we are only 1 diversified holding company, which is Exor. We've also shifted very much our revenue base to what we used to be, which was a very European centric company, and that was a combination of 2 factors, divestitures of local businesses. We used to be a large shareholder of the largest commercial bank in Ettinintes of Sao Paulo, of the largest retailer department stores in Argentina, largest tour operator, Alpitur and by acquisitions of companies who are more global, like Cushman and Wakefield Partner E, but also by the evolution of the businesses we owned. And finally, the extraordinary job that was done by Sergio's leadership in transforming Fiat from what it used to be, which was a very which was an Italian centric conglomerate into what it has become, which are really free independent global leading companies. Today. So today, XOR is one of the leading diversified holding companies globally. These are a couple of numbers that give you an idea of the breadth and scope of what XOR is, which is a collection of different businesses, which most of you know, the one which you know less is Partnere. And we will have the opportunity today to share more about Partner E with you. FCA, Ferrari, CNH used to be part of what was Fiat. They are in their own rights today very strong global companies in their fields. Juventus is one of the world leading franchises. It is anecdotally the franchise that has belonged for the longest to a family in the whole world. So there's no sports franchises in the world who have been who have belonged to one family for such a long time, and we're very proud of owning it. And football has grown, is growing even more. I'm always amazed by when I go to the U. S. And see how much people are really interested today in soccer. And what used to be a girls' game is now much more broader in terms of its interest. I know that India still fancies cricket, which in if you look at what Facebook has in terms of sports, cricket is actually number 3 in the world. Football is number 1. So we're very happy about Nuventus and The Economist, which is one of the leading publication and what we underwrote in our investment of The Economist, which we already owned, was really the rarity of serious content and information and the ability of being able to have a paying model, a subscription model if you're able to have information distilling that information that people really care and are interested in. So what do we do at Exor? Our main function is really to allocate capital and we do so primarily in our own businesses. We do in new businesses, and we also do it in buying back shares, which fundamentally is investing in ourselves. And we have done so since inception in 2009. And this is really the main skill set and occupation that we have with our role as owners, meaning being very involved and close to our businesses in order to make sure that with the right leadership team and the right dialogue, we were able to have companies who perform well and who perform better than their competitors. Our objectives are the same that we've had and will remain the same. They're very simple. We want to make sure that our NAV per share grows more than the MSCI, which we have achieved so far. We want to make sure that we generate cash. So the cash we get from our companies in terms of dividends, net of our costs and our interest are superior than the dividends that we give to our shareholders. And finally, we are committed to being conservative in our capital structure, and Enrico Velan, our CFO, will tell you more about that and are committed to having an investment grade rating. The results of all the hard work with my colleagues and mostly the companies that we own during this period of time has been very positive. We are between the share appreciations and dividends, our shareholders and the ones who were with us in this period of time have done well. And we are very proud of that and thankful for your trust. What I'd like to do now is really to have Henrico go through some of the financial metrics that guide us. And after that, the big chunk of today will be Emmanuel and Mario telling you about partnering. Thank you. Thank you, John, and good afternoon. John walked you through Exur's 3 main objectives, I will be providing further insight in the next few slides. Our gross asset value today is 26 dollars 1,000,000,000 and that is substantially made up of 4 businesses. Our gross debt is €3,900,000,000 and I will elaborate more on in a moment. And finally, our result in NAV is about €21,800,000,000 We've been working on bringing our debt down through asset disposal and dividends received from the operating company. And the debt is now stands at €3,900,000,000 We very actively manage the debt we own with a mix of financial sources balancing across different maturities and amounts. As of today, our average interest cost of bonds debt is equal to 3%. Finally, I would like to highlight that all debt mature in 2018 is already covered by commitment facility currently in place. Our 3rd main objective is to have an investment grade rating. So we were very pleased that as a result of the work that we have done, Standard and Poor has confirmed our rating and upgrade our outlook to stable. Finally, as of now, Exor loan to value ratio stand below 15%, which is substantially below the 20% target. Just on this note, Eirico has done an incredible job where we were from on the aftermath of the acquisition of Partner Re to get our gross debt within the parameters. And that was a combination of selling some assets, of generating free cash flow from our companies and also our overall gross asset value increasing. We are very committed to this. And so our objective is really to march towards being as year end of 2017, improving our gross debt position. In order for us as we enter in 2018 to be able to have resources to eventually to deploy. Buyback is one of the opportunities, especially with the trust we have in our underlying companies and this discount we have. We will not though be looking at buybacks or new investments for the remainder of the year. We have a lot of work to be done also on our companies and potentially new ideas. That's something my colleague Suzanne is working on. But just to clarify expectations, our goal is really to end the year by continuing to reduce our gross debt in order for us to be able as we enter into in 2018, as we have resources to then be able to allocate them more properly. So with this said, I'd like to transition to Emmanuel and Mario. It's been a pleasure to work with Emmanuel since we entered in discussions with Partnerie and agreed on the acquisition. The company under his leadership has done a lot of work. And I am proud to say that since the ownership of XOR under Emmanuel's leadership with Mario and his colleagues, the company has strengthened. And with that, I let you, Emmanuel, tell the good story about partnering. Thank you very much, John, and good afternoon, everyone. It's a pleasure to be here with you this afternoon in this historic and beautiful place. And it's an honor to be given the opportunity to talk about the fascinating business of reinsurance, but also the fascinating story of Panuari. Together with my colleague here, Mario Bonacourso, CFO of the company, we are going to walk you through over the next 40 minutes. We're going to walk you through our view of the industry, our view of partnerry's position in this industry, particularly following Exro's acquisition. We're going to walk you through how we have actually worked on improving the organization and the operation since Exro's ownership. And finally, we'll close with providing you with some outlook on what we should be able to deliver this year. The deck has been very generous in terms of information. I hope you'll appreciate this. I'm not going to walk you through each and every bullet points. I'm going to let you some time to digest some of the points, but Mario and I would be more than happy to take any questions when we close. So the overall thesis here about the market and our positioning is that when we talk about the market when I talk about the market, I like to talk about supply and demand of an industry. And what's happening with the demand in reinsurance is a couple of things. We are seeing sustained demand for risk transfer. There are new forms of risk coming like cyber. There's also the increased complexity of the world we live in and the increased connection that drives high demand for risk transfer. But it's also the fact that our clients do not want to keep volatility on their balance sheet and they're looking for ways to transfer it. And our clients, our reinsurance clients are increasingly looking for reinsurers who are large, global, relevant and with whom they can actually partner with for capital and solutions. That's for demand. On the supply side, it's really a 2 pronged supply. There is alternative capital coming in our space. It's here to stay. It plays a meaningful role. However, it's been really confined to the property cat space. And then there's the traditional participants. And on the non life space, it's a great number of reinsurance participants, much more than the life and health side where the market is a lot more concentrated. We'll talk also about inefficiencies that we can actually exploit in the reinsurance business. We have cycles. It's a cyclical business. And when we have cycle we have opportunities to actually explore it create some out of the cyclicality. So that's for the market and I'll expand on some of these points. Our position is partnering as a global diversified relevant and agile ranger and I will tell you what this means and why this. Some of our distinctive value propositions is we are a pure play reinsurance player. This is a bit of a contrarian play in a world where a lot of people follow the insurance and reinsurance model, but we believe this is a model that will succeed. And one of the reasons for this is we do not compete with our clients. We have a special edge in specialty lines. Specialty risks are where are those that require more expertise, they have higher barriers to entry and about half of our non life portfolio is in specialty business. We also have a unique positioning in life and health. It's a selected approach to life and health, but with big large potential to grow and add further diversification to our book and portfolio. And finally, we have the long term private ownership of Exeter, and I'll tell you why this is an additional competitive advantage. The priorities we are working on, we have been working on, we'll be working on is continue to grow our relevance and footprint in the non life space with selected clients and brokers, is growing our life and health book with a targeted approach, It's focusing on agility. And what I mean by this is a speed to market is the ability to react very fast to opportunities created in the marketplace with local disruptions, for instance. Finally, it's continuing to develop key talent and work on our high performance execution culture. And last but not least, it's rightsizing our expense level to gain efficiencies and maximize returns. Our returns objectives are in the 8% to 10% range over the next 3 to 5 years' period, taking into account the current environment and the current market conditions. So with that, let me just dive in over the next two slides a little bit more on the market. And the point I'm making here is that there will continue to be a need for well diversified relevant reinsurers. So it is reinsurance is a good business to be in for four reasons. One, I alluded to this on the previous slide. There is risk. Risk is on the rise. We're seeing urbanization. Greater urbanization brings concentration of values in property cat exposed places. We're seeing globalization world globalization increasing the connectivity increases the connectivity, for instance, pandemics or supply chain risk. But we're also seeing new forms of risk. And one of the risks that has actually risen over the last 3 to 5 years is really cyber risk. So that's the first reason there is demand for risk. Second thing is there is high potential. There is a you've heard about the protection gap, which is the gap between when we have an event between economic losses and insured losses. That's been the case, for instance, has been particularly notable with Hurricane Harvey in the States where we found out that the population in Houston is only 15% insured. So you have massive gaps of under insurance or non insurance. That's in the case of non life, for instance, flood in the U. S, which is a major peril. But it's also the case in life and health with launch emerging rising middle class societies in some of the developing markets wanting to access some of the life and health products. So that's the second reason. The third reason is primary insurers continue to have distaste for volatility and shareholders of primary insurance companies continue to want to pay a premium for stabilizing earnings and getting predictable dividends. And finally, we talked a lot about alternative capital. Yes, alternative capital has been a structural change for our business, but it can replace traditional reinsurance balance sheet, particularly for risks that are less commoditized that have medium or long tail classes or long tail lines of business. So overall, there is a clear case to be made for a distinctive reinsurance offering. People reinsurance were able to offer a balance sheet that actually offers the diversification between lines and geographies are able to offer specialist expertise in risk management and risk evaluation to our clients, and finally, who can actually take on the volatility for price from our clients and take it on their own balance sheet. Now there are opportunities in this market. It's not a it's a market that has inefficiencies that could be exploited. What are those inefficiencies? First of all, within a certain class of business, within each class of business, it is really risk selection. It is about risk selection. It is about avoiding the bad apples and betting on the right horses. Second thing is between different classes follow different loss trends. So for instance, a loss trend in U. S. D and O business, casualty business a very different to, for instance, agriculture business in Brazil. 3rd, there are some of the classes have high barriers to entry. I briefly alluded to this when it comes to specialty, but clearly there are some markets that are not acting as commodity markets, specialty, a number of classes in specialty, also life and health. And finally, I believe we will continue to see cycles. Now with the efficiency of capital, with the fungibility of capital, with the elasticity of capital, and the way the capital, the alternative capital can access the business, particularly the property cat business. We're likely to see shorter cycles with less amplitude. But that raises the need to have reinsurance operations that are very agile and can grab opportunities fairly quickly. So all these we see are not only characteristics of the reinsurance market but are a number of reasons or a number of ways we can actually create additional returns, which brings me to the partner repositioning. I told you we're global, diversified, relevant and agile reinsurer. What do we mean by this and why does it make sense? Global is really to make sure we can access the risks wherever they are. We have 22 local offices worldwide. We have an organization that combines global and local access. And we can really access there's no business in the world out there we can't access with our franchise. It's not just being local. It's also we have decades of history in the company of building portfolios of clients and broker relationships over years. And we have gained over the years a very strong reputation. We're diversified. This is one of the core pillars of value creation and reinsurance. We're diversified across life and non life risk. And what I explained to you in a few slides is there's also diversification that we're creating within life and within non life risk. Relevance. We are relevant to our clients. We do matter to our clients. Why? Because we have the financial strength not only, but we also have impactful lines that matter to our clients. But we combine this with the quality of the delivery in terms of solutions. So a number of our clients, a number of the larger global insurance companies have actually shrunk their reinsurance panels over the last 5 years, sometimes from 40 or 25 to a handful of reinsurers to 5 to 10 reinsurers. And every time they've done this, they've elected Partner A to be one of the core reinsurance panels they wanted to deal with. Agility is critical in our business to make sure we can generate extra returns. This is about speed of action and this is one of the ways we can actually outperform some of the larger slower players is the dynamics of the portfolio leveraging our size but also the financial flexibility provided by our private ownership. And finally, it sounds trivial, but we are a reinsurer. We're a reinsurer who focuses its execution on reinsurance. We're not dispersing our resources between insurance and reinsurance. We're focusing our execution on reinsurance or reinsurance like business, which means business that is risk driven, capital driven, expertise driven and not distribution process driven and certainly not competing with our clients. And that's a distinctive trait of our value proposition. So I will tell you that Pantneri is very well positioned to achieve strategic goals and to differentiate from our peers. How? We are positioned to be a core reinsurance partner. I explained to you on the last slide why. We have the financial strength, dollars 8,000,000,000 we do matter. We're pure. We don't compete with our clients. And for a number of our clients who play in the commercial and industrial space, it does matter. We have a global region presence with 2,000 clients in 150 countries. We have well respected expertise in a number of classes of business with market leadership. We also have one of the best diversified underwriting portfolios. Profitability. We also have a great positioning in Life and Health that provides us also with potential to leverage this position to grow and find further diversification. And finally, we have low reliance on property cat earnings. Only 4% of total net premium written in 2016 was property cat. And last but not least, a real distinctive component of our value proposition is this new private ownership. How does this why does this matter? And why is it distinctive? Why does it how does it differentiate us? I would say 4 points. Number 1 is the way it lends itself extremely well with our business model. We're here to take volatility out of our clients' balance sheet for price and this can only be done if you take a long term view of risk. 2nd, it actually enables discipline and rigor, discipline and patience focusing only on long term value creation undistracted by the optics for instance of premium growth. And 3rd, for certain classes that can only be looked at in terms of economic value creation over time like life and health, the long term private ownership model is the perfect one. So it lends itself well to our business model. Second thing, it is also part of our value proposition to our clients. Reinsurance is a form of partnership and capital with our clients and our clients have been extremely well positively disposed to the new ownership of Partner A because they see this as a component as a critical component of envisaging this partnership in capital over time. 3rd is execution focus. There's no distraction. We're only focused on our clients and on creating long term value. And 4th, it's been clearly a plus to attract new talent. I'll mention this a little bit later in the presentation. We've been extremely successful at attracting high caliber professionals in the industry and they've been attracted by the story the new story of Partner E and its new ownership. I mentioned diversification a number of times already. So it's time to actually show you a little bit more data about what we mean by diversification. And you've got 2 charts here. 1 is on a geographic basis and the other one on the class of business basis. On a geographic basis, you can see the overweight of North America and Europe and actually Asia and Latin America are territories we're actually growing. The interesting one is the one on the right hand side which is the diversification by class. You can see 22% in Life and Health, 41% in P and C, and 37% in Specialty. But what is actually striking on this chart is actually within each one of these 3 pies, you actually have great diversification as well. For instance, if you take the life and health one, you see longevity and mortality as 2 segments. They actually diversify with each other because there's a natural negative correlation between mortality and longevity. So if we were to look at this and compare it with our peers, what differences would we see? If we were to compare this diversification against the Bermuda and American peers, What it will show is that we're less U. S. Centric, more international, more global, more specialty focused with more life and health. And what it says is simply more diversification, but also lower reliance on pure cat, property cat premium. If we were to compare this diversification with our European peers, what you'll see still is more specialty than our European peers with some clear leadership in a few classes of specialty, but also a more targeted approach to life and health, which brings me to the life and health component of our portfolio. And the simple question is, why do we actually like Life and Health? I'll tell you that for a number of reasons. First is really diversification. Life and Health diversifies in terms of cycles. The Life and Health market does not follow the same pricing trends as the P and C market. The second is simply risk diversification for our capital between non life and life. But third, there's also, as I mentioned earlier, diversification within the life and health portfolio. The second reason why we like Life and Health is for its profitability. We view this as over the long run as a double digit return on equity business because it has higher barriers to entry. As I mentioned earlier, it's a much more consolidated market when it comes to the number of supply participants. And the third reason we like Life and Health is that it has significant growth potential. By growth potential, I mean there is demand for this product. There's opportunities for growth and that's that again lends itself well with our private ownership to focus on long term economic value creation more than short term accounting numbers. Our position in life and health is we're a focused player. We are that allows us to be nimble, to take profit of market situations or to avoid challenged markets. For instance, we're not in the U. K, the very large U. K. Mortality markets that's been challenged for years. For instance also we were not in the Australian disability market which was very challenged but now after a market dislocation, we saw the opportunity to get in and we could do it quickly. Another dimension of our position here is we are we've been patient in terms of growth. We've been steadily growing organically, mostly organically our life and health portfolio. And we've added this year bolt on acquisition which I'll mention in a minute with the Origin Re acquisition. And then we have a great customer base and we can add to whom we're seen as clearly a value add service partner. So just to conclude on all this, our strategic priorities are 5. 1 is to continue to have to secure and to grow the sustained access to the business longer term. And that's a combination of 2 things, increase our footprint and relevance with clients and brokers, but also selectively growing our Life and Health book. That's one thing. Second thing is we're in the business of risk. So a clear success factor for us is making sure we select the right classes we select the right risk within the right classes. And so here there's a 2 pronged approach. There's a top down allocation per class and is also the bottom up risk selection within each class. And the success will come from the right balance in terms of shifting the capital to the right classes, but also making sure that within each class, we have the right selection. And we complement these capabilities by the use of data and analytics. 3rd is portfolio optimization. We have a framework for building a portfolio that allows us to really steer the portfolio to the classes where we see superior risk adjusted returns. But it's also finding pockets of growth or of attractive growth in the current marketplace. This is a market that is that's been challenged, but we still see opportunities for partnering to actually grow in some specific areas. For instance, I mentioned cyber earlier on or surely. We also see in a very fast growing universe of insurance in Asia Pacific or Latin America, we see selective opportunities, particularly on the specialty side or the life side to continue to grow profitably. And finally, as I mentioned earlier, we will continue to see cycles. And so our ability to proactively manage a reinsurance cycle is also a key success factor. To do all this, we'll continue to build and develop the talent base. We have a couple of executive team replacements that we're doing between now and the Q1 of next year, and we continue to evolve our culture towards high performance. Last but not least and you'll hear more on this from Mario in a minute, we've been we continue to put a clear emphasis on cost effectiveness making sure we're a lean organization to maximize returns. Maximizing returns that brings me to our objectives. The group objectives are to reach return equity of 8% to 10% over the next 3 to 5 years period, taking into account the current market conditions. How do we get to 8% to 10% is a combination of, 1st of all, return on underwriting. So return from underwriting operations on the underwriting capital, that's what we call the return on capital of greater than 8%, complemented by return on the financial investments and real estate greater than 8%. And then we get a little bit of tailwind due to our financial structure. We've got some leverage 20% to 25% with the cost of debt being lower than the overall objective. And if you combine all this with the tax rate, that's how we come to this expectation and objective to be in the 8% to 10% return on equity range. That concludes the first part. What I'll talk to you now about is how we've been improving the organization since the Exor acquisition last year. I'll cover the first part on underwriting operations, and Mario will cover the improvements we've made in operations, capital structure, and investments. In a nutshell, and that's the executive summary for what we're going to talk about, we've developed a new organization structure. We've added talent to our underwriting areas. We've refocused the business away from some of the non strategic pockets of insurance business we used to have. We've accelerated our development in life and health through the acquisition of Origin and I'll give you a little bit more on this. And then we've actually continued to optimize our underwriting portfolio by dynamically managing the capital particularly in the property cat space. Mario will tell you some of the meaningful improvements we've made on the cost side. We've taken $60,000,000 of costs out and we continue to work on this. We have reinvested a small portion of this in growth initiatives and we're very proud to be the first time ever Bermudian insurance or reinsurance company to access the euro bond market with a €750,000,000 euro bond we issued in September, a year ago actually, at 1.34 percent yield. That reduced our financing cost and enhanced our capital structure. It was definitely something we could do and it was facilitated and enabled by the fact that by the European parent ship of our company. Investments, three things we've been working on. We've reallocated the portfolio to improve our risk adjusted returns. We've redefined the operating model and again it's a 2 pronged model with in house management of standard fixed income by leveraging external managers for financial investments and real estate. And finally, we simplify the organization with a leaner operating model. So, let me walk you through the points under A above, and I'll pass it on to Mario afterwards. The improvements we've made to the organization are fourfold. We've designed a better organization for our business partners, our clients and brokers on how they can access Partner A. We've made the organization a worldwide organization centered around business segments of P and C, specialty and life and health. So easier, better organization for our clients complemented by a global accounts unit that actually addresses the needs for clients who are totally approaching reinsurance needs totally globally. Second thing is a better controlled organization through the appointment the appointments of a Chief Underwriting Officer and a Chief Risk Officer. The Chief Underwriting Officer focuses on steering the portfolio, making risk decisions on the underwriting side and its first line of defense and the Chief Risk Officer, Chief Risk and Actual Officer focuses on risk, capital and reserving and I see this as a second line of defense. 3rd, it's a better organization because we've refocused our scope on reinsurance purely. So we've actually exited a couple of segments that were no longer strategic. That's the SME insurance business in Europe, but it's also the E and S insurance in the States. These models were completely subscale for us and they didn't fit our pure reinsurance model any longer. And 4th, we've actually made the organization stronger in terms of talent addition. We've hired a new CEO for Life and Health who joined us in April from SCOR. What I didn't mention here is we had this week a new Chief Corporate and People Officer coming from Google who joined us so fairly recently. And a number of people asked me, so how do you attract all this talent in the industry? And it's been a consistent experience of being successful at attracting high caliber people by the quality of the partner re story under EXO's ownership but also the long term view of risk, the long term focus on value creation. I mentioned the Origin Re acquisition a couple of times. It's time to give you a little bit more information on this bolt on acquisition. So it is a bolt on acquisition. We closed it earlier this year in April. And clearly, the message here is it's been good for partner. It's been a good acquisition for partner for two reasons. Number 1, it was done in a way that was financially attractive to the group. And why was it so? Because we were uniquely positioned given our long term horizon, our focus on long term economics rather than short term accounting to actually bid at a fairly attractive price. Second thing is it's strategically attractive. Partnering in life and health, we were not present in North America. And as you can see on the two charts on this page, Origin has a comfortable position of 9% in the Canadian life reinsurance market and a foot in the door in the U. S. Life reinsurance market. We see this as great position that we can further leverage particularly as we add partneries reputation and financial security to the business access provided by Origin. And I finished with this one before I pass it on to Mario. This is the way we've been dynamically managing our portfolio over the last few years. It's a discipline and rigorous approach to risk and return and we've taken here the example of our deployed capital in cat in property cat. If you just focus for a second on the chart on your right, the one that has that green diagonal, what you can see here is that we've continuously over the last 6 years, we've continuously reduced our risk appetite or capital deployment in cat as a function of the return expectations we were seeing in the property cat space. So as returns were compressing, we were compressing the amount of capacity we were deploying. And that's and the other way to look at it is with the 4 charts on the left with the PMLs, the probable maximum losses for 4 of our main perils and showing you the decrease from 11 to 17. And the way we've done this is through retrocession purchasing. We've kept our footprint, our gross writing with the clients intact, but we've bought more and more retrocession to cover ourselves. Just to give you a couple of numbers to illustrate this in 2012 we were buying 130,000,000 of limit of retrocession and this year we were buying a 1,000,000,000 of limit. With that, I pass it on to Mario to talk to us about cost and financial structure. Thank you, Emmanuel, and good afternoon, everyone. Other lever we decide to use create value in Partner Re were the optimization of the operating cost and also the optimization of our capital structure. Operating costs are an important lever of reinsurance profitability. In general, insurance, our industry on average runs in the mid-90s combined ratio, so between 90% 95%. And our industry expense ratio is in the 7%, 10% range. So every point of expense reduction is a 10%, 20% impact on the underwriting profitability. Having kept this in mind, we tried to optimize our cost structure, being able to reduce by 15%, which is $60,000,000 what was our operating expense compared to the 2015 baseline, which is the year before XOR acquisition was completed. This year, costs are on track with budget. We are 4% below budget. We are implementing during this year other action that will see their impact in '18 and potentially 'nineteen. But we are not also cutting costs. It's important also we optimize the expense and we focus this operating expense on where they can create long term value. So we reinvested approximately €10,000,000 in Grow initiative, Life and Health and Global Account are 2 of this. The second part of the capital structure, As Emmanuel showed you, Partner is really a global diversified company in term of geography, and we have 30 6% of our business, so our premium that comes from Europe. However, if you look at our cost structure, the majority of our costs are in Swiss francs because our headquarter in Europe is Zurich and in dollar because the majority of the people are based of the other office are based in Stamford, Connecticut and in Bermuda. So there is a cash flow mismatch between the technical profit of the business written in euro and our cost structure, we generate a positive euro cash flow. Partner rate capital structure was entirely based in U. S. Dollar. So this created a currency mismatch. So taking opportunity of very favorable market condition last year in September, we were able to issue a 10 year euro bond €750,000,000 which at a yield of 1.34%, there is an element of luck. Really, we really were able to issue the trough of the interest rate in the market. And that's the first time a Bermuda reinsurer has had access to the Eurobond market and that's a very important achievement we were able to do. In addition to that, the partner we had pretty fair capital, which could be replaced by the senior debt. So we redeemed approximately $400,000,000 of preferred share whose yield was between 6.8% 7.2%, replacing effectively this capital with 1.3% yielding capital. And that has contributed to reduce our cost of capital. In addition to that, the delta between the capital issue and the capital that we redeemed was positive. So actually, we strengthened our capital base in addition to reducing €19,000,000 of pre tax financing The other important lever in value creation for reinsurance company is investment. Now what we did in investment, we changed the operating model of Pernari and we optimized the investment cost And there was a team of 60 people with a yearly cost of approximately $50,000,000 The analysis the conclusion we came is that Panarea has really critical mass and product excellence in what we call standard fixed income, which are government bond, investment grade corporate credit and agency MBS. This class, our portfolio, as you can see, is approximately EUR13000000000,000,000,000, EUR14000000000. There is critical mass and this asset class can be managed now with above market performance. Historically, partner already had done that. The other asset class, as you can see, the volume are more niche. So to have that skill in house is expensive, but also is not optimal because there are larger third party asset manager that have more better sourcing, better market access to that niche financial investment opportunity. So the conclusion we came was that what we define financial investment, which are public equity, alternative credit, 3rd party private equity fund, high yield emerging market should be outsourced to 3rd party manager. As a consequence of this, we changed operating model. We were able to save $22,500,000 in expense. And at the same time, we introduced a new asset class in the partner investment portfolio, which is real estate, which was not present before. Real estate is an important asset class within our insurance balance sheet because one of the biggest risks we do have in our balance sheet is inflation because our liability, the reserve are tightly linked to inflation. So an inflation increase may create potentially an increase in the reserve of the company, negatively impact our balance sheet. At the same time, real estate is a good inflation hedge because in an inflationary environment, real estate usually tend to appreciate. In addition, real estate enjoy very favorable capital charge from regulator and rating agency. So for all these reasons, we introduced real estate as a new asset class to be able to optimize risk adjusted return. As you can see, compared to we put here September 15, which was a year before a quarter before the XOR acquisition. And now, actually, we have decreased the risk in the portfolio. As you can see, the standard fixed income has gone up from 82% of the portfolio approximately 87% and the financial investments are going down from 18% to 10%. And actually, the yield the return that you can expect from this portfolio is comparable to what Partner Re was getting before, having reduced the amount of risk. You should expect this portfolio under current market condition to deliver $500,000,000 on net total return on year, approximately 2.9 dollars $390,000,000 $400,000,000 from net investment income, pretty predictable and $100,000,000 $110,000,000 from mark to market gain coming from financial investment and real estate. So this shows that through the different action, we have been able to reduce the risk, optimize risk adjusted return and taking also strategic action on the best operating model of the portfolio. This gives you an idea on where we are positioned in the risk curve for investment. As you can see, we are in the lower limit for most asset class equity alternative credit real estate. We are in the upper limit in 3rd party private equity fund. And as an outlook, you should expect 3rd party private equity fund to gradually decrease as the funds run off to increase an increase in alternative credit and a mild increase in equity real estate under the appropriate market condition. In general, today, we are deployed at approximately $1,900,000,000 $2,000,000,000 if you include commitment to real estate. Our limit for financial investment real estate is 3,400,000,000. So there is additional 1,500,000,000 room compared to the risk limit our balance sheet can manage. Financial outlook. We want to give you it's very difficult. Some of you have asked whether you don't provide an outlook. It's very difficult in our industry to provide an outlook because, as you have seen in Q3, events are unexpected. So what we are trying to make here to give an idea of the loss we will have from the hurricane and the event in Q3, an overview of the profitability we expect in Q3, but also the profitability we expect over the course of the entire 2017 financial year. As a reminder, during the first half of the year, we reported a net income ROE of 8%, approximately $243,000,000 This figure is net, excluding severance and transaction costs, which are related mainly to the original acquisition. The driver were annual life combined ratio of 91.7 percent and investment total return of $363,000,000 Now Q3, there has been an unusually high frequency and high severity, I have to say, unfortunately, of losses. Due to the hurricane Harvey in Pan Maria, there have been also 2 earthquake in Mexico, nor related. We estimated that the materiality for us of this event for Panarea is related to the 3 hurricane Harvey, Irma Maria. And today, we estimate a reinsurance loss combined for this event at a midpoint of $475,000,000 This figure is pretax and is net of retrocession and restatement premium. The range is still pretty wide. The nature of this event is very complex, particularly Harvey and Maria is very, very they are not standard hurricane. So the caution is that there is a high variability on this figure and on assuming sure the loss. But to the information received today, our midpoint of estimate is €475,000,000 Other important element of the quarter is that, as Emmanuel mentioned to you, our portfolio is very well diversified in Life and we don't have a heavy reliance on property cat. So notwithstanding this €470,000,000 pre tax loss, in Q3, we expect a pre tax loss in the $60,000,000 $90,000,000 range, which is going to impact our book value common equity for in the range of 1%, 1.5 percent. Again, these are preliminary estimate. We are 5 days after the quarter closed. So there is, of course, uncertainty around this number, but that's the range we are comfortable sharing with you today. The rest of the Non Life book performed extremely well, excluding, of course, this cat event. So this contribute to reduce the €470,000,000 loss. Reserve development, we had favorable actual versus part of the loss on the old book. This contributed to continued favorable reserve development. Partner has had an Easter in the past quarter of favorable reserve development that is expected to continue this quarter. We had certain profitability we had a certain profitability issue in our health book. We had 1 midsize loss. And also, we it was not the Q1 we had a midsize loss in health book. So we decided to what is called an a priority adjustment. We decided to adjust the profitability expected of future business to reflect this event. And so this will negatively impact the quarter. And we had a relatively solid investment return, which with a return expected in the range of €150,000,000 in the quarter. So all of this leads to pretax loss of €60,000,000 €90,000,000 range in the Q3. For the full year, we have to make certain assumption given the nature of our business. So if we assume that there are no additional material capital large losses, and I cautious you that we are still in the cap season until early November is considered to be the cap season, the hurricane season in the U. S. Assuming that there is no mark to market of the government bond and investment grade corporate bond in our P and L. Differently than our peers, we have the mark to market of standard fixed income in the P and L not as available for selling the balance sheet. So this creates it's an accounting volatility effectively. Assuming there are no impact from this event, we expect to report for the full year 'seventeen our net income in the €220,000,000 to €300,000,000 range, which is a 4%, 5% ROE. And really, this shows you that even in a year which has reported the insured loss in excess of €100,000,000,000 and I think there have been only 3 years in the past 100 years that I've seen issuer loss in excess of $100,000,000,000 We should be able, with this assumption and cautioning that the estimate on the hurricane are still subject to change, to report a positive profitability. Last but not least, our capital position is very solid. We expect to remain with a capitalization at year end, which is in excess of AAA standard and pool capitalization, allowing us to exploit market opportunity there on their underwriting on the investment side should this arise. And this also shows you that all the work Emmanuel has explained to you in building a very well diversified portfolio, in managing our capital deployment in Cat, which has decreased, as Emmanuel has shown you, in taking out €60,000,000 of cost and €19,000,000 of financing cost, they're showing the result in terms of bottom line profitability in a very tough cat year. So I leave to Emmanuel for the final remarks. Yes. We'd just like to add a couple of comments on the hurricane activity. It's been an unprecedented series of events this year. And before we actually think about the impact on the business, our first thoughts go to all the victims of these events. The population has been displaced, lost families. 2nd point on this one is that is for events like this that our industry exists and it demonstrates the value of our product because of reinsurance economies and populations can respond and rebuild faster. 2nd point which is extremely important to mention is that as Mario alluded to, this loss is actually well within our model expectations, is well within our risk limits, is well within the risk framework or cap property cap framework I've shared with you a few slides ago. Third thing is it demonstrates in this quarter the fact that how much the non life profitability can offset of the losses is a clear demonstration of the power of the diversification of our earnings. And finally going forward cat appetite will be a function of the magnitude of the price increases or corrections we'll see in the market but also what we learned the key takeaways in terms of cap modeling and what happened with these events. And before I pass it on to John I would actually just like to reciprocate some of the nice comments John made in the beginning that for us it's been also a pleasure to work under the wing of Exeter and with John and it's been a pleasure working with the whole team. It's been the right combination of support, of commitment, but also in a demanding way. And we look forward to contributing to the success of XERRY for a long time. Thank you, Emmanuel. And I also would like to mention Andrea Casarotti, a former colleague of Exelon, which is the Chief Investment Officer of Partneri, who's here. So a lot of what's going to be done on the investment side, which Mario discussed, will be under his responsibilities. And also my colleague, Matheus Colari, from Exor, who will be running a concentrated portfolio of equities and will be starting and has started investing. So they also will be part of what Partner Re will be doing and going forward. And I thank Emmanuel, Mario for what they told you today, which is, I think, important for our shareholders to know that Partnere so far has been a positive contributor to XOR and that the company is stronger than it was when we acquired it. I'd like to close with a couple of remarks. We've been looking at our peer group. And so we try to assess, and we have an analysis on this that you can find attached to the documentation you have today and also which will be on our website. If we take the diversified holding companies globally with a market cap above US10 $1,000,000,000 and there are 14 of them, what we observe is that they have over performed the market over a long time period. And the reality is if you look 5, 10, 15 and 20, it's quite consistent. And it's amazing to say that these diversified holding companies have actually, if you look on an annual base, they've actually returned 12% per year versus a market who's returned 6%. So as a category, diversified holding companies is actually a good category. And this is reassuring for us working in a diversified holding companies, but also reassuring for our shareholders. The second interesting and which is less intuitive element is that actually, if you track the companies, these diversified holding companies own, and there are 60 of them, actually 66 to be precise, the diversified holding companies have actually outperformed. And there is a thesis which says that a diversified holding company is a overhead layer on a replicable portfolio. Hence, it requires a discount because there's not really much value to them. Now empirically, what this analysis says is that there is actually value and that, in effect, they have, over time, created more value than the underlying. And the reason why they've created more value is fundamentally linked to ultimately 2 aspects. The first one is that if one is able to and discipline in the capital allocation, which we discussed before, you actually create value because you're able to buy back to buy companies you own, as you know them well. You're able to buy new companies and you're able to buy your shares. And secondly, if you're a good owner, and I thank Emmanuel for what he said before, and you do work in a close and constructive relationship with the leadership of the businesses you're involved with, there is actually value to it. And the interesting element of this, which we haven't attached in the analysis, if you track the actual businesses owned by these diversified holding companies and you look at how they have performed visavis their peer group, they actually outperformed them. And this is just to say, and it's reassuring us, that the actual category is a good category historically and that there is value in diversified holding companies. Now the other good news for our investors is that if you look at our market cap, you actually today are buying XOR and getting Partner Reef for free. So if you are pleased with what you heard today by Emmanuel and Mario, you actually are in a good place. So with that, I'd like to thank you all and close with this quote from my great grandfather also honoring him as we are in his house, which I used in my shareholders letter for 2016. And I think this quote is very telling of our business family history, but also of the last decade. And that a lot of things that we could have been afraid of or that seemed impossible, luckily, were actually achieved. And I really look at this as an encouragement to the years ahead. With this, we're going to open up for Q and A. We have approximately 100 people also who are with us, not physically but virtually. So we will make sure also if they have questions to make sure to answer to those. Thank you very much to all of you. Thank you very much. This is my first time in front of the Exel Board and it's extremely impressive. It's impressive to see somebody who's an owner of businesses rather than just a buyer of shares. One of the big reasons for the outperformance of Berkshire Hathaway and Markel has been their ability to allocate more than other insurance companies to their equities portfolio. Could you maybe address if there are any regulatory restrictions? I think you're based in Bermuda. And can you just give a sense, I know that you're all students of Berkshire Hathaway, what can we expect to see in terms of concentrated equity investing in the partner REIT portfolio going forward? So in term of restructuring, we have capital constraint. Capital constraint comes to 3 different sources. The first is regulator that you mentioned. The second, our rating agency. And the third, it's our internal capital model because we have our own risk, our own view of risk, which hopefully is more accurate than regulator and rating agencies because we know our underwriting investment portfolio better. So we have a risk guideline, which say that all our liability needs to be backed by standard fixed income. So we this is not our money. This is not shareholders' money. This is money that belongs to policyholder. So we have our risk guidance, let's say, that only government bond or investment grade bond or agency MBS, which are effectively U. S. Government backed security, can back our liability, which is the concept of flow. Having said that, our capital, which is €8,000,000,000 we can take a risk. And as you can see, what we believe is according to our risk limit, we can invest up to €3,400,000,000 of what we call financial investment in real estate out of our €8,000,000,000 And then we like also diversification, as you saw. I think being diversified is good, not only in underwriting, but also in investment. And you saw in every asset class what's our limit and where we can go based on current. Having said that, if excess capital grows, which is you mentioned Berkshire Hathaway and Markel, they have massive excess capital, the amount of capital grows from €8,000,000,000 to a larger amount. So this limit can be increased and the amount of capital allocated to equity can effectively go up. So that's effectively the first framework, which is the internal partner. If you are comfortable with that, Bermuda is pretty a good regulatory environment for investment. So of course, they need to check we are within their parameter, but strength are not more material than the one we will impose ourselves with our own risk limit. And then rating agency capital as well, they charge you capital for concentration risk or for equity compared to other asset class. But as of now, we are in excess of AAA capital. So that's not a constraint at the moment. And if we are able to build excess capital, this may give room for more equity investment. So that's to give you a framework on how we think and how we approach the investment side of the balance sheet. And maybe concentration, if you want to Yes. There is a charge for concentration on our top ten position, but equity capital charge is in the range. Depending on the different parameters, it's up to 50%. So even if you add a concentration charge, which is 20%, you still are able to benefit significantly from investment leverage, which is 2 to 1. So this means that if you have you may assume that if you have a public equity performance of 8%, the return on equity is going to be 16% for the effect of this leverage, even if you take into account concentration. So we do have concentrated position. As you are aware, Almacantar has been sold by Exor to Partner Re. So that's a €500,000,000 position, which is concentrated. It sits in Bermuda. And real estate has even lower capital charge. So that's another example of what we have done. But for the moment, you saw our risk appetite on the investment side is pretty on the low end of the range and less market condition change or will build even more excess capital. Thank you very much. Stephen Wood from Greenwood Investors. Emmanuel, I'd like to go through some of the customer satisfaction sort of KPIs. So what was your renewal? What's been your renewal rate in 2017? And if you can unpack that, what is your voluntary sort of like you're not renewing the contract versus the customer? Yes, take it from there. So I don't have the exact 5% to 10% And out of the 5% to 10% cancellation, it's been half designed by the company and half retained by the clients. And there's no business lost to competitors that we would have liked to retain is more the result sometimes of consolidation in the insurance market space where people then stop seeding some of the business that was reinsured by a company that's been bought. And on your actuarial assumptions, how many of your contracts that you write are breakeven or unprofitable or are there none? I think the way we look at it is we look at clients, we look at profitability of a client and we make sure that every client we write is profitable. That's just it. Okay. And then I noticed your premiums outstanding under the specialty lines has actually shrunken faster than the rest of the book. So can you kind of talk about, especially with the lower OpEx at the group, the trend with technology basically, ops leading specialty lines? And where do you think some of your lines are most at risk from becoming commoditized? And how what you're doing to prevent that? So can you help me with so you say some of the specialty premium has shrunk? Yes. The premium in specialty has shrunk faster than the rest of the premiums written. So can you talk about I mean, the industry trend with these specialties no longer specialty after 2 or 3 years because of the technological progress. So can you talk about what you're doing to prevent that obsolescence of the specialty lines? Actually, our access to specialty lines has remained excellent. We still see lots of opportunities in the various specialty classes. It's a business where we do manage the cycle. So there might be some classes where we've actually taken some steps to manage the cycle. So to give you an example for instance in the energy business the energy offshore and onshore business we've actually taken steps over the last 3 to 5 years to actually accelerate the contraction of the book in terms of risk management. So that's really done by design more than by accident. I can't think of any specialty class where we've actually lost business due to some technology trends that you're referring to. Actually, on the contrary, we actually see that we can add technology to help developing solutions to clients. That's one example for this is in the agricultural space for instance is what we call precision farming and we're partnering with companies to actually help insurance penetration of agriculture through the use of technology for farmers. Yes. And one to address your point, there is a reason why you see a bigger decline is because we lost one large client in agriculture because of M and A. This client acquired by a large insurer and that account for more than $100,000,000 of premium lost. But the combined ratio of this business was in the high mid-90s, so the profitability lost. And in fact, as you see, the combined ratio this year in specialty has been the profitability specialty has been higher than last year, notwithstanding the premium decline. But if you offset by this contract, the decline in specialty has been less than the decline in P&C where we have making action in book in certain part of unprofitable bull book where we have shrunk the underwriters. And then just lastly, what is your with the 3 storms, what was actually the gross impact adding back the retrocession benefit? We don't disclose this figure. Thank you very much. Good afternoon. Martino De Ambrochi, Equita. In your initial remarks, you talked about the focus remains in the short term, at least on gross debt reduction. If I look at your portfolio, I would say that everything is core apart from smaller assets. So it is just a matter of dividends, cash inflow, cash outflows? Or is there anything else that could accelerate the debt reduction? And connected to this question, what's the level of loan to value you are comfortable with in order to restart the diversification? And also, you mentioned the buyback. Nothing is envisaged despite the discount widened over the past few months. And also, what's the time frame or discount or loan to value you would consider the threshold to restart? So as I mentioned, our objective is really to be able to close 2017 by having reduced our gross debt. And there's a couple of actions that remain. Some are related to smaller assets that we have, as you mentioned, and we're looking at those disposals. And secondly, by generating some cash flow through dividends to be yet taken. In terms of entering 2018, we will then evaluate by then the alternatives for us to deploy capital. And if things would stay at the levels where we hope to be and LTV being around 15%, we have comfort between 15% and the upper end, which is 20%, also assuming a good generation of free cash flow for 2018 to be able to think at allocating capital in buying back our shares if the discount continues to be the one it is as we have a lot of faith in the potential of our companies and an alternative looking at possible investments, which by definition will be smaller investments, which is also what I hinted in my shareholders letter in on 2016. Adam Wyden from ADW Capital. First off, I want to say thank you. It feels amazing to be in the presence of wonderful capital allocators and people that have an ownership mentality. And I want to say thank you that I've been able to be part of this journey. But my question is, a lot of guys have alluded to Berkshire Hathaway and I think that there's a lot of similarities here and God willing I'll be able to do this for next 30 years and this will be the next one. But part of Berkshire Hathaway's strategy instead of selling companies they've invested their capital to build companies. And you obviously have Ferrari that doesn't require capital, but CNH Industrial was an opportunity to merge companies. How do you feel about deploying future capital into platform companies like Magneti Marelli or Alfa Romeo Maserati to build high return invested I Very, very comfortable. And as I said in my presentation, that's really number 1 in terms of where we would look at allocating capital. There's it's much easier to be able to invest in what you know. And if we had the opportunity of being able to provide our companies with capital for them to grow, that would definitely be a priority. And that has been the case. I mean, we have invested in FCA. We have a very clear understanding with Partnere where we have an understanding of retaining earnings, and Origin is an example of an acquisition that Emmanuel spoke about. So our objective is really to be able to have companies which would require the possibility of investing that capital at superior rates. And so if that were the case, we definitely would be very pleased with that happening. Alberto Hila from Intermonte. Good afternoon to everyone. A few questions from my side as well. First of all, as Mr. Marchionne recently has hinted to the opportunity of spinning off Magneti Marelli and connecting to the previous question, Is that a business that if spun off would be part of the XOR portfolio for Xhor portfolio for a long time? Is that something that you would consider as a long term investment as it has been in the case for CNH and Ferrari or it's not something that you would consider? And secondly, some investors asked me about the opportunity or the possibility that in the mid long term you would consider floating back partnering in the future. It doesn't seem from the presentation it's something on the table, but if you just can comment on it. And finally, thank you for the slide in which you say you get Pernod Ric for free. It seems taken from an equity research. I would wonder to know what why you think the discount on NAV on Exor is so large compared to the peer group you mentioned. And given the I mean, the performance and what we have seen, it seems today shrinking. The stock is performing very well after this presentation. So maybe it's more about having these opportunities to get an update on the strategy of the company. Are you planning anything on that side? And finally, if I can, on Partner Re. You mentioned a combined ratio in the region of 90%, 95% as an average. I wonder if the changing world and the risk changing will shift this through the cycle combined ratio range in the future or if you feel comfortable this is the level you think is doable in the mid- to long term? Thank you for the very good questions. As Sergio Matione has said publicly, the possibility of spinning of Magneti Malania and Comau is something which the board will review, especially as FCA is achieving the ambitious objective it had set for itself in 2014. If these companies were to be spin off, a span off and XOR would result being its largest controlling shareholder, definitely we would look at these companies and try to see how we could build them. On Magneti Marelli, division is one of the very good businesses Magneti Marelli has, which is world leader in its category. And despite all the changes cars will have, I think lighting will still be a very important feature in it. For the question around why do we have such a big discount, I think that Partner Re is somehow not known or at least what Partner Re has done in this time period is not known by the market. On the other hand, we feel that it's much better to communicate when we actually achieve something rather than try and communicate on aspirations. And so we felt that we needed some time and a lot of work that Emmanuel and his leadership team have done in order for them to be able to communicate that. So I'm hopeful that the fact that today you get PartnerRe for free as one feels comfortable about the way Partner Re is performing will give the opportunity to our existing shareholders and potentially new shareholders to be interested. I also think that on the back of very strong appreciation that we had this year of FCA and Ferrari, we have some lag between the underlying companies and Exor. In terms of communication to the market, I do think it's healthy to have one moment a year where we can have a communication and tell about the business. I don't think that going on roadshows probably can be helpful at some point. But if you look at a longer period of time, I do think that a proper session and interaction with our right shareholder base. On the technical ratio, I will let Emmanuel and Mario answer that. So the question on combined ratio and whether the 90%, 95% is sustainable, I would respond to you in twofold. First of all, the combined ratio is not the only metric. It's just one of the metrics we use to steer the business, but it's not a perfect metric because it doesn't reflect the time value of money. Just to give you an example, the way we price casualty business is with higher combined ratio than the cat business for instance because there's duration risk. And so the return on equity, a similar return on equity for cat and casualty means a much higher combined ratio on casualty than cat, which brings me to it's really about the mix of business. So if we I've showed you how much we've contracted, your combined ratio as a result of the mix goes up. So the combined ratio your combined ratio as a result of the mix goes up. So the combined ratio is a function of 2 things. 1 is a function of the mix of business and it's also as you probably point out too, it's also a function of the pricing level in the marketplace. And this the current market is a soft market and also we look forward to and we believe there will be times with price increases some stage where the combined ratios at equal mix would actually improve. Anything you want to add? There's a couple of questions on partner RE so we can continue. And I think this is very good because it shows that the actual presentation that Emmanuel and Mario had is gaining a lot of interest. So one is what you said you expect to have enough capital at year end to exploit any market hardening opportunities, you think the market will harden. Related to this, does your ROE target 8%, 10% include any uplift from increasing cat exposure? So it's always difficult to make crystal ball predictions about what the market will do. The market is a result of supply and demand and we'll see where the market clears. It's not for me to say where the market is going to clear. Having said that, our expectation is that given the amplitude of the insured losses in the market that we will see price corrections. We'll see price corrections starting from primary business actually. We're seeing U. S. Primary players increasing property prices. That has a compounding effect on the prices we get because we get a price on their own price. We will see price increases in the cat space, in the retrocession space. The question for the question the market will have to answer is how localized or how globalized is the price increase or the price correction. There's no doubt there will be price correction for loss affected treaties. There will be price corrections for U. S. Cat business. There will be price corrections for retrocession. My assumption is we will see a minimum at minimum for the other territories or the other classes, we'll see minimum stabilization of the conditions. But I do believe actually we will see minor price increases in other regions of the world. So the question was there was a question about the sorry, the question is here. So do you think the market will harm? And I just answered this one. Related to this, does your ROE target of 8% to 10% include any uplift from increasing cat exposure? No, it's a yes, I will cover those too. Our ROE target is a 3 to 5 year. So it contemplates any years of price corrections or cat losses. There's a comment about some senior executive departures. So can you comment on recent press reports that there were some senior executive departures upon the recently? We have announced earlier this year I think in July that 2 of the members of my executive team Tad Walker who manages P&C and Marmin Pesco who is the Chief Risk and External Officer will both retire at the end of the Q1 of next year. This is not a surprise this was well discussed and planned ahead and so we are working on replacements for both of them. And so what was the gross loss? I think we already answered this one. What are your prediction for possibility of rate increases? I think that's the same question as do you think the market will go harder. Thank you very much for the invitation. We are students from University of Turin, and we want to ask you a couple of questions. Which are the advantages of investing in family business rather than investing in a non family one? And also, which are the strategies that Hector should adopt to invest in Italy again? Thank you very much. So on the first question, and without being self serving and being analytical on the answer, we have done a lot of analysis and there's also many, many research who track family control businesses. And what they tend to say is that if you look at how these companies have performed and also transgenerational companies, so that have been in families through multiple generations, they've tended to outperform the market. And generally, this is linked to them being more conservative. So going through hard times without having problems then. It also tends to be driven by a stronger presence in terms of the company and who works in the company of being more accountable of feeling more ownership of the results and also being able to have a long term view. Now one has to be careful with long term view because if you only think about the long term, it might be bankrupt in the short term. So the reality is that it's more about the right balance between how you can plan for tomorrow, but also make sure that you meet payroll today. Now you could argue that the ones that survive are by definition good companies. So you end up having a number of companies that have performed better than the markets because these are the ones who by being good companies they end up surviving. I think that what the reality is, is that if you look at good companies with a good ownership that combination is a very good combination. And so if you're able to do that, you will outperform the market. And one of the things as we look at how increasing the equity exposure of Partner E is we have done and are doing a lot of work on our Exor family business index. Index investing is very fashionable these days. So we also want to participate in that trend. And we have now different models that are proving that in effect, we would have an index which would by far in many different conditions outperform the market, which is also a way to preparing ourselves in case we did have some market dislocation or correction to be able to invest in equities in a way where we feel very comfortable. In terms of Italy as an investable universe, I think there are many opportunities in Italy and there's no preclusion in investing in those. As I said before, now we're not in the conditions of looking at investments in general, but we would definitely look at companies. And if we were to invest in Italy, it will be in companies which are not big companies but are companies that have a lot of potential growth. And I do think that the universe of investable companies there is pretty large. And the Italian entrepreneurs have proved over the years to have been very successful in starting, building and growing these companies. And so associating ourselves with those would definitely be something that we'd look into very, very seriously. Elizabeth Miliades from Bank of America Merrill Lynch. I just had some questions on the hurricanes again. For the estimate of €475,000,000 what's the underlying market insured loss which supports that And what is the catastrophe budget for it as well? And furthermore, if we were to see pricing increase across U. S. Cattle more broadly across all insured products, would you look to increase exposure to catastrophe? Thank you. So the €475,000,000 loss is based on an aggregate insured loss of €85,000,000 so that's our that's the market share. Yes. This figure exclude the issue loss covered by NFIP, which are sizable, which is in excess of because if you compare with some of our peers, they include this figure in. So it's in excess of the if you add the 2025 of NFP, you get to 105, 1010.10. And who should read your report? So who hasn't read your report? I think it's you did a very good job in it. Thank you. And so the second part of the question is if we see price increases what would be our approach, is that your question? As I mentioned earlier, our approach to I think we are well positioned if we want to leverage opportunities. We'll have to make sure that first of all the price increases are worth it and second that we take all the learnings from what we've seen with the hurricanes in terms of what we learn for cat models for instance. And the cat load for full year financial 'seventeen is 195,000,000 Thank you. 2nd bite at the apple. John, many of the people here, almost all of us are Europeans. There are some Americans. The action in the world is in China, India emerging markets and to the markets and to the extent that it's in Europe and North America, it's in the tech sector. That's not an area that I personally am exposed to. It's not an area that XOR is exposed to. I'm sure you get questions. What is an old European family to say to the fact that we're not where the action is? And how does one prepare oneself for that? So I'm happy that Prashant is here, who came from India. And Prashant used to run the Goldman Sachs Indian Fund and has now started his own investment fund, of which we are proud to be one of the we will be one of the first capital providers with others. And that's a concrete example of how we are looking not only at Europe, but the U. S, but looking at other markets. And we think that India is an interesting opportunity. And so we've been studying it and we'll be as we increase our equity exposure, we'll be doing it with professional investments like Prashant and again with the same principle of having a view, which is a concentrated view on those markets. In terms of tech, I think that we view it in 2 ways. One way is that the companies in which we are involved will benefit or will be threatened by technology. And we are in the camp of the ones who think that if you are agile, like Emmanuel described, which is a very it's a very fashionable word today, but it is important to be agile and to pivot. And if you're able to do so, you actually will benefit too in existing businesses and in existing markets by how technology can be utilized. In terms of pure tech, and so how do you invest in pure tech, we have a lot of exposure because there's a lot of interest from new companies, startups, about some of our industries. And we haven't yet really, apart from learning from each other, and that benefits the point I was making, really to see if we would contemplate investing directly. On the other hand, venture investments tend to be small and as an asset class in aggregate is a horrible asset class. So the reality is unless you invest with the best investors in tech and the best founders, which, by the way, choose who they want to have as investors, then you're not going to be able to really create big returns. So unless we're able to be appreciated by strong founders and to co invest with strong investors, I think it would be not the best usage of capital for XOR. In terms of innovation, technology and how this plays out here in Europe, you are here today in a physical place where as a family and through our foundation, which has nothing to do with XOR, we've put a lot of our resources to really try and create and be part of an ecosystem, which I'm sure will breed to some of that innovation you mentioned. Stephen Wood here one more time, sorry. Suzanne, I'd love to hear from you, if you don't mind. We have an unparalleled network here. And since you've come on, how have you sort of have you been looking to systematize your sort of your pipeline, your flow of things coming to you? And then if so, like, what have you been doing on that regard? And then where else are you focused right now on the privates? No, it's very interesting actually because I think as we know as a whole in the market there's a lot of capital around and a lot of people are saying there's not that many opportunities. What's been very interesting for me coming into Exor and as John says one part of my role is to look at potential future investments is through a combination of the network that we have, which is very well established, particularly in Europe and in the U. S. Those are the 2 geographies that we know very well where we have very well established networks, including in particular Italy where we are, where we obviously have a very deep base and a very deep network. We actually find a lot of opportunities, and a lot of opportunities come to us very proactively. I think we are choosing, as John says, at the moment not to invest. We may well start to invest from next year but I'm not finding a shortage of opportunities which is very interesting when I go and talk to say for example private equity firms and so on a lot of them are finding the opposite, I think, which is they have a fair amount of capital and they're looking for opportunities. We're actually in the opposite situation of finding opportunities, but waiting until we deploy capital. So I think we're quite excited about what we will be able to do. We're very excited about Italy. There's quite a number of very, very interesting companies where we may well do something, but not this year in future times. One more question for me. Are you happy with the CNH Industrial Group structure? I mean, 3 different businesses? Okay. It was inherited, so you cannot do anything right now. But over the next 2 years, if there is an opportunity to have on one side an asset, maybe Iveco, and on the other hand, the remaining businesses or just the agricultural business, knowing you know very well the meaning of the spin off and how it works, would you be happy with this solution? And if I may, one more, maybe small question. On Formula 1, I remember many years ago, you were interested in Formula 1. Is it conceivable the co investment or the investment at XOR level If I don't know if there is the opportunity with Liberty Media and so on, but maybe not. But in the future, would it be feasible? So on Formula 1, one of the learnings we had when we had an interest in buying it by feeling we had an edge and we were looking at this with News Corp who also had an edge as for Ferrari and then as broadcasters. We ended up understanding that that edge was actually not really an edge, but it was a problem because we were too much part of the Formula 1 construct. So based on that experience, we would not have any interest in participating directly as investors in Formula 1 because we feel that would be not productive. And ultimately, that is something which Ferrari is a participant and an important one, and that's where the relation exists. In terms of Your question on CNH, CNH has gone through a very hard time with the ag cycle, which they've managed well, if you look also at its competition. And the promises of having a capital goods business like CNH is that you have an engine, which is really the largest investment for the different applications, agriculture equipment, construction equipment, trucks, commercial vehicles. So within that frame and if you look at comparables like Volvo or if you look at recently John Deere, who's acquired Construction Equipment, it shows that there is a validity of having within the scope of activities of a capital good business this combination. On this note, I want to really thank you all for coming. If you have time, we wanted to take the opportunity also of mingling and having a drinks, some drinks or and thank you. Thank you very much and thank you to everyone who's been listening.

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