Goldman Sachs Insurance Symposium 2012

May 15, 2012

I think we'll go ahead and get started. I want to ask our first panelists to come up. This is our professional liability panel. I'd like to ask Craig Mense from CNA, John Doyle from AIG Chartis, and Greg Flood from Ironshore to come up. We're going to try and do this. I'd like to encourage the audience to participate. I have a series of questions. I could go on for the entire 45 minutes, and if needs be, I'm happy to do that. If you have questions, this is a great panel. John runs Chartis' commercial business, has been doing that for some time, is certainly a figure in the space. You've got Craig Mense, who's the CFO at CNA Financial. Greg Flood, who's been a D&O underwriter for, I want to say, a couple of decades maybe. Is that- I'd rather not remember. Long time. It's been too long. Up here you've got two executives, you've got an underwriter, and I think that the dynamic here is particularly interesting. Maybe I'll give each panelist just a couple of minutes to introduce themselves, and then we'll get started. John? Thanks, Michael. As Michael mentioned, I am responsible for Chartis' global commercial insurance portfolio. I assumed responsibility for that a little over a year ago when we reorganized our business from a geographic first view to organizing around our commercial and consumer businesses globally. I did spend the early part of my career in the financial lines business and, in fact, worked with Greg a bit. I appreciate everybody's time. Craig. Craig Mense. I'm the Chief Financial Officer for CNA Financial Corporation in Chicago. I've been there for seven years. I started actually as a surety bond underwriter at the Aetna Casualty and Surety Company quite a few years ago, longer than Greg's 20 years, I'm afraid. I've been around the specialty business for quite a long time. Obviously, we at CNA have pretty broad and deep interest in this space. Yeah. I'm Greg Flood. I work at IronPro, which is a division of Ironshore here in New York City. We underwrite directors and officers and professional liability insurance. Prior to that, I spent a great many years working either brokering John Doyle or sitting side by side with him somewhere along the line. I just want to kill these rumors. I think I started my first underwriting or my first brokering in this product line around the time that Ronald Reagan was just getting sworn into his first term. I've had an opportunity to underwrite some of the most nefarious characters that we've seen in the last 30 years, which may be a testament to my skills, and adjust their claims subsequently. All right, well, I'll go ahead and I'll kick it off here. Can you just talk about your kind of strategy? There's been a lot of talk about commercial pricing, commercial lines. Can you talk about what are you seeing on the professional liability side and kind of your strategy within professional liability, how you choose to sort of differentiate yourself from peers? I'll start with John. You want me to start? Much like Chartis' overall P&C business, our financial lines business is a broad, diverse book of business. By product and geography, it's an important part of our commercial portfolio, and it's really a critical cornerstone to as many of our key client relationships around the world. It's a very important business to us in many ways. It's been a key contributor to profit and underwriting results over a long period of time. Of course, as we navigate the globe, different challenges, different opportunities for us. Both opportunity and challenge for us is to try to weave our way around the world in an informed way to maximize the return on the business overall. We have a positive view about the business. We think our portfolio today is performing well. About 60% of our business is in the U.S. The rest is scattered throughout the world. The next largest segment of our book is in Europe. Again, it's an important, critical business to us and one that we see lots of opportunities for us, particularly in developing markets around the world. Craig? We are primarily a North American operation. I'd say 90%-95% of our revenue comes from the U.S. and Canada. We have a smaller European presence. Much more focused domestically in the States. We really try to differentiate ourselves by both being expert in product and industry groups. We have spent most of our focus. We think that has translated into delivering value to customers, and that's through product and risk control and claim service, and that's also translated into greater share and greater profitability by combining that product and industry-specific expertise. We recently, in the past three years, kind of reinforced the attempt to kind of broaden that industry perspective in terms of number of products we might deliver to certain customer segments that we've identified. Our strategy has been much more one of focus and specific focus on certain products and certain industry segments. If I were to categorize small case or large case primary or excess, is there an area that you kind of favor or participate in more? We are almost entirely a primary market. Okay. Most of our coverages, as the customers and the size of customers has gotten larger, then we tend to be more excess than primary. Most of our business is professional liability for professionals like lawyers, accountants, architects, and engineers and such. Much more a primary player. Got it. Thanks. I guess an underwriting question, Greg. Interest rates obviously are a challenge for the industry. From an underwriting perspective, how has the dialogue changed for you over the past 12 to 24 months, given where interest rates have been, and have you seen any more receptivity to price increases recently? Are low interest rates a driver of that? Well, you like to believe that low interest rates are a greater driver of a discipline on the underwriting side across the industry. I can't tell you that the metrics prove that, but rates come in and out with the tide. We've been in a pretty soft rate cycle on professional liability side for some time, despite the fact that interest rates have been at all-time lows since 2007. I think you're just at a moment now in history where the primary markets are very public about the fact that rate is inadequate. Primary carriers, as you all know, carry a greater responsibility on defense cost than the large national account spectrum and commercial account size companies. Their cash flow is different. The cash comes in and goes out a little quicker. I think that's where the biggest sensitivity is towards rates and towards interest rates. As you can see in the press, a lot of the larger, more legacy position carriers in our business are responsibly pushing rate right now for their interest on the larger accounts. On smaller accounts, you see rate changes as well, but it has a little bit more of a tendency to follow the profile of the jurisdictions that these companies operate in, whether it's a geographical jurisdiction that has bad news typically attached to it, which may be like California, or if it's an industry sector like technology or something like that that is typically volatile. You'll see a lot of sensitivity in the small company side, too. I would like to tell you that the excess layers where we participate in a lot as a newer company in the large accounts is going up as well, but it's not. It's going up in segments. You'll see a great deal of price pressure emerge in industries that are clearly challenged or, again, geographical segments that are dangerous. It's not universal just yet. Not all boats are going to rise with the tide. You have to be extremely selective in where you're positioning yourself on an account, where you're positioning yourself relative an industry, and where you're positioning in a product area. In your kind of underwriting for IronPro specifically, what sort of role does the level of interest rates play in as you think about pricing? Ultimately, it has an effect on my bonus. We have never been measured, and this goes back to when John Doyle and I were kids in this business, but we have never been measured, I remember, John, one year based on interest income on the cash that we put to treasury. We were always measured on one thing and one thing only, our combined ratio, and we operate that way exclusively. Our investment side takes care of itself so long as I don't go over 100. Got it. I would say I do think interest rates are a factor in the market overall. While financial lines rate change is lagging the rest of the commercial insurance market, you take a look at the economics overall, and while obviously last year was an extraordinary year on a global basis from a cat loss perspective, the industry regenerated a bunch of capital. You look at the economy as a measure of demand. I don't think much has changed in the supply-demand balance, or imbalance maybe at the moment around the world, and yet prices are up. What did change in that period of time was that the Fed came out and said interest rates are going to be low for an extended period of time. I do think that's a factor in the market. While, again, financial lines is lagging a bit, we're seeing some progress over the last several quarters into positive territory. For us now at Chartis, our primary performance metric is risk-adjusted profitability, it does factor in the interest rates or investment yields, anticipated investment yields. Mike, if it helps just to back up what John's saying, my focus, as I mentioned before, was the professional liability and directors and officers liability. My company is seeing the same thing that John's expressing. The casualty lines and in the property lines, the rate movement is much more momentum. Maybe just from my own perspective, as you can imagine, maybe a little bit different. That obviously investment income is a critical component of insurance underwriting profitability, and we are constantly readjusting the combined ratio targets. I think Greg's exactly right. What you try to do is convert your ROE expectations based on what kind of investment income you're getting to a different combined ratio and translate that to your underwriting staff. I don't think you tell customers That your interest rates are down, that's why you deliver value to customers through risk control and other services. I think that's what we sell, certainly optimizing investment income and being able to hit objectives that our shareholders are concerned about is a critical component of setting the right level of price and combined ratio target. I think really, Mike, when you think about it, the things that are more impactful in the current environment is more the regulatory and economic uncertainty that add to that in terms of financial returns that are driving this dynamic, more the pricing dynamic. All right. First round, any questions from the audience? All right. If I see a hand, I'll stop, but otherwise, I'll keep going. How about terms and conditions? Last year, obviously, there's a relatively high-profile bankruptcy in the financial sector. Did that change anything? Has that change continued to kind of roll through the environment? Is it still relevant today? Are other factors contributing to kind of this wedge under the door as far as pricing is concerned? Wedge under the door? What do you mean? Just, I mean- Just make sure I understand what you mean. You've got some momentum. Why aren't prices up more? Yeah. No, meaning that you've got. Oh, why it's. momentum going from negative to positive in terms of pricing is now slowly improving. It appears to be. Look, I think, again, there's been a modest amount of rate pressure for many years now. That has the effect of compressing returns. I think combined with, again, the current interest rate environment, I think everyone's under pressure to improve current accident year returns. I think all of those factors. I don't think one financial institution bankruptcy is all that relevant. There's many in a year. They're different flavors and different varieties. I don't think that particular situation drives it. It's a business that's gotten a lot more complicated, right? I think for a long time, many investors looked at the number of securities claims that were filed as maybe a measuring stick of kind of what the exposure was going to be in a given year. You're seeing state court actions, regulators far more aggressive, SEC investigations and proliferation of employment-related claims, right? It's a far more complicated formula from an exposure point of view. Again, I think all the factors put some pressure on current accident year returns. I think you're seeing the market respond in a somewhat rational and maybe more disciplined way than it has in the past. Craig, what about terms and conditions? Have you seen changes on that front over the last 12-24 months, is that evolving or? Well, Mike, there was a time in our industry when terms and conditions would move uniformly across all insurers, virtually all insurers. We would have sort of standard formats for public companies, private companies, professional liability lawyers, professional liability and accountants, professional liability and architects and engineers, the miscellaneous sector, financial institutions. Over the last 15 years or so, particularly with the information technology that you have today, there's considerably narrower approaches to each one of those areas. You can see terms and conditions change dramatically in one without seeing nearly the same change in another. I think the most recent example I can point to is the subprime crisis result and what the financial institution sector turned to. We started in mid 2007. The company was created in January 2007, I thought we were still a youngster, but now with all these other companies coming into the market, I think we're actually a little bit more mature. When we started, the subprime train was coming down the line, I had an opportunity earlier in my career to work extensively through the one in 100 year event of the last banking crisis that was 15 years before the current one. That gave me a great deal of experience how to handle failing institutions. When we entered into the market, the terms and conditions that were available to financial institutions for errors and omissions insurance and for directors' and officers' liability insurance were considerably broader than what they were 12 months later. 18 months later, it was hardly a market that was nearly the size that it used to be. We took back terms in that market, we put out extraordinarily higher rate than what existed 18 months ago. Simultaneously, you could walk into the private company D&O market here in the U.S., it was going down 12% simultaneously, the terms were only broadening for whatever was left to broaden in the form. That's the way the market operates pretty much now. Rates are going to go up. You see them edging up now. I think returns have been just struggling too much, particularly with low interest rates we're talking about. Terms and conditions do not come back typically as fast. That's something an insurer holds very dear to their heart more than cash. It takes a while for those to come around. It really takes a crisis many times in a niche to really accelerate a change like that. Craig, on terms and conditions, in your book, have you been changing? Have you seen the industry changing in the kind of vintage of business that you write? No, I agree with Greg and John. No real significant changes in terms and conditions. Customers are expecting to deliver value to them in terms of risk-taking. We're all risk-takers. I think one of the things most important is what John said a few minutes ago, about no one's going to react to a single event. We're all in this business and have been and expect to be for the longer term. You're not going to react to 100,000 clients because of one client, necessarily, unless it tells you something systemically. The longer-term underwriters don't overreact to individual events. I think we all look probably at many of the similar things. We look at general levels of risk in the market, general levels of coverage, and general levels of price, which I think we'd all kind of measure as pricing being roughly equivalent to 10, 11 years ago. I think the things that's driving price now is just the level of risk. Level of risk and uncertainty, as I said before, is up, which is just rational, and most of the players in the market today are behaving rationally, so therefore, people are seeking improved pricing. Do you see, Greg, you mentioned some kind of new companies, a lot more competition. Are you seeing more of that now? Are you seeing more companies come into the market? Are you seeing the level of rationality among that vintage of competitors change? Are you seeing people exit? What sort of behavior are you seeing on that front? As old as the industry, the newcomers typically are willing to do something that perhaps the established markets aren't. You do see some pressure on terms or price, ILFs, whatever the issue may be, coming out of some of the newer entrants that just walked into at least the professional liability and the management liability field. It's funny because here we are, we're five years old, and we've seen the market deteriorate materially in general pricing, with the exception of those niches I was talking about, over the last five years. Whoever's coming in now is starting at a much lower level of rate than what we made ourselves available to. Economic factors influence things. You can look at some better indicators in the economy than what we were facing a couple of years ago, but I wouldn't take a whole bunch of confidence in that just yet. Invariably, with the more capacity that comes in the market, you're just going to have a little bit more of a competitive atmosphere. They don't work their way into the layers that the legacy carriers, I don't know, for many decades. They're mostly finding out in the upper layers on these bigger programs. It does put a lot of pressure on the market. There are 60, roughly, D&O markets now or so in the United States. Yeah. I have to tell you, when we started in 2007, a guy, Steve Sanford, from Aon, let me know we were number 37, and I think the other day when I was over there, they told me they were up to 60. I'm very pleased to announce we were number 22, though, at this point, we got somewhere. Some in and out. Something happened. Yeah. It is a little crowded, for sure. I would add that all markets aren't of equivalent status, right? We work hard to differentiate ourselves as a market. There are really only a handful of markets that I think most major brokers would trust in leading a program. One of the critical ways that we distinguish ourselves is on the claims side. We have a very, very deep team of experts in resolving all types of professional liability litigation. We're known for that, and large clients, midsize clients certainly feel very, very good about having us at their side should there be a challenge. That's a critical way for us to differentiate ourselves as a company in that space. Does occupying that lead position allow you to kind of push harder on whether it's pricing or terms and conditions? Do you have more opportunity to do that in a lead seat? I do think the net effect of how we distinguish ourselves as a lead company gives us the ability to drive different terms and conditions. I think generally speaking, as you move up a tower of coverage, the client and broker may look at that more purely based on price. Again, not every deal is the same. Not every client or broker treats it the same. Generally speaking, yes, that's true. I think there's a question in the audience here. Marissa? I had a question on retentions for John and Craig. For professional liability, I was wondering if any pressure on retentions has abated of late. Pressure on retention, has it abated? As you've been pushing rate, I presume in the early days you faced pressures on your retention. Sure. Has that abated at all of late? I think overall, our portfolio is in the high 80s from a retention point of view. Earlier on, we saw it dip a little bit as we were trying to get the message out last fall. We've seen a little bit of tick up in the first quarter on retentions, which gives us a little more confidence, frankly, to push a little bit harder. I would say overall, retentions have been around what we'd expected given what we were trying to accomplish on the rate side. What I would reinforce is we haven't seen retentions really change at all over the course of the last two quarters. Now, let's be real, the rate increases have just really kind of haven't been there, kind of reversed from a long-term decline of however many years that's been. Hate to even remember. We've seen little to no pressure on retentions at the moment. Question, I think there's a gentleman right here. I apologize as this is overly general, given that you're competing with 66 or 67 markets, how do you develop a strategy for any kind of durable comparative advantage? Well, what we try to do, first off, is get as big of a geographic spread as we can. Just as a matter of background, we have started what's essentially four professional and D&O operating units between New York, Bermuda, Toronto, and London. The combined aggregation of all that money is now about a third of the company's revenue. The benefit of that geographic spread is you get a much wider look at everything that's going on, everybody that's in the market purchasing, whether it be Western Europe or North America. The subtext to that is you try to drive your submissions as absolutely high as you can. To do that, you have to establish a very vibrant distribution network. Doesn't have to be an extraordinarily expensive network. You just need product in the market on a very wide basis, you need people in strategic purchasing centers of insurance that are stirring the market to get submissions coming your way. When those submissions do start coming in, and you start driving those numbers up, if you handle them responsibly enough, you will find the places that you want to fit in into the market. I will tell you with my company, we average about an 11% score on our submission tally each month. Initially, we started out doing about 600 submissions a month, and now we're up to 48,000 annually. You can see the metrics move up with that if you can keep that hit ratio consistent. In doing that, though, you're running across a variety of products. We have 36 in the market right now. As I mentioned before, we're over a very wide geographic spread, you don't get wedged into any narrow product offering, you don't get narrowed into any geographic limitations. That helps drive a very wide acceptance of different risk. You can pick the A, B, C, D, and E out of the crowd pretty quickly if you want to score risk that way and circle yourself in some what were traditionally good yielding product areas. I think that what you need to keep in mind is professional liability business is much broader than public D&O, we all tend to talk about it like that's the end all and be all because that tends to be the bigger, sexier sounding stuff. The market is much broader and bigger than that. As I said, we've attempted to differentiate by picking out specific industry niches where we can bring value, that's through product and claim and risk control. We've been able to participate actually and gain the endorsement of certain professional, not just firms, but associations about delivering that value and partner with them. I think that's how you differentiate yourself, by being a longer-term participant, by listening to customers, by delivering risk value to customers over the longer term, and by talking to them honestly and openly. It's no different than in standard lines. The same producer relationships make a big difference in relative to concentration. I think maybe a little different than what Greg said, rather than being a little broad and moving in and out of markets. I don't know if that's exactly what you're saying, but we've tended to be very deep in certain customer segments where we think we can differentiate ourselves, that has proven to be, and we believe long-term, drives both share and profit. Do you do a lot of bundling then for your particular customer target groups? We are doing more bundling for specific customer target groups. Again, delivering those products where we think we can make a profit to a customer segment. Just to echo Craig for a second, Mike. Sure. The professional liability market is multiples in size of potential sales than the directors and officers liability insurance marketplace. There's only so many public companies. I haven't looked lately, but last time I looked, there were about 6,000 publicly listed companies in America, if I remember correctly. You can put down millions of private companies, but most of the buyers are limited to the larger segment of the private companies. In the meantime, think of the unlimited amount of professional liability sales that go on in the service economy. The size of that is just remarkably large. There are niches in it that people specialize in. We tend to think that we're pretty good in a couple ourselves. I know CNA has been remarkable in its professional liability book for years, concentrating on certain quarters in that practice. I know AIG's from first-hand experience, divided up very neatly inside the different niches of the professional liability market. Once you get inside that market, and you have a following amongst the broker world, you can typically work pretty comfortably inside where you want to be. Was there a question over here? Jerry? One here, and gentleman, you'll be next, sir. We'll go backwards. We'll come to you next, if that's okay. Gentleman. I'd love to get some background a bit. Some of the comments earlier were about rates are not sufficient. They're starting to come up a little bit, there were later comments about more entrants coming into the market and more capital coming into the market. How do you reconcile if rates are not sufficient? Why are you guys coming in, how do you raise rates if you guys are coming in? Just if you could help. I didn't say rates were insufficient. I said rate change is lagging other lines of business, right? From a rate adequacy point of view, I wouldn't say it's lagging other lines. As I also said earlier, there are many segments. We've all talked about there are many segments to this business, right? There are segments of it that are generating poor risk-adjusted results, but collectively, it's a good business to us. Again, I think we have the benefit of a very broad global book, right? I think why is it so attractive to market number 59, 60, and 61 is kind of anybody's guess other than I think they probably have looked at decent returns in the space over time at large market participants. It is kind of, I think as I mentioned earlier, for us, it's a cornerstone in our broader client and distribution relationships, right? It's a very important line of coverage for obvious reasons to our customers and to our brokers. It's a good way to kind of distinguish yourself and distinguish your broader platform by cementing the relationship from that perspective. I think it's also market number 59, 60, and 61 are probably littered with some people that used to work at some of the larger market participants, and they think they can hang a shingle somewhere else and kind of recreate history. It is I think a bit overcrowded for sure. Is it more overcrowded than the rest of the market? Maybe not so much, again, I think overall, we're pleased with the current performance of our business. I think historically, the profitability in this area of the insurance industry has run pretty consistently profitable. Some years have been extraordinary. With the exception of a three or four-year span that was around the 2001 events, for the most part, most years were pretty manageable. I think there were a couple of years there where loss development was difficult on a lot of markets if you think back into things that were going on in Wall Street in those years. Most of us have memories of all that, so we believe we can get back to that under almost any condition. More importantly, it comes back to diversity again. We're a startup market, so I'm not looking from the catbird seat of the large company any longer. There are remarkably different performance ratios, and they show up historically in a rearview mirror, and you can see them going forward as well, depending upon which product area you're in, which industry niche you're in, which geography you're in. It's remarkably different. You take just comparatively because we have a tendency to go back to directors and officers insurance. If you look at the performance of European directors and officers' liability loss ratios over a 10-year period and compare it to America, it's night and day. If you take Ohio-based companies and compare it to California, it's much more than night and day if I can find a metaphor to compare that. There are narrow pieces of even troubled parts of our pie that are constantly yielding very good rates and very good returns. I think that's the way most of us come into this business. Whether I was market 37 or the 60th guy, we probably all have the same thoughts. If you are coming in, you have to have a license from your employer to do a very wide band of product and a very wide band of geography. If you paint yourself into a small corner and you pick the wrong start, it ain't going to work. Jerry? Pass the microphone here. Right. Thank you. You mentioned there's been a change there for 10 or 12 years. The rate environment was difficult. The ROEs for your collective businesses, not necessarily you three, but the whole industry, were not particularly great. Now it's changing, albeit maybe not where you want it. Could you look out in the future a year? If we were sitting here a year from now, what do you think the rate environment will look like then? I'll defer to John on that one. I think we probably all do it. It's hard to not engage in wishful thinking. Yeah. A year's a long way away. We're encouraged by the momentum. Even over the last 10 years, while overall rates have been under pressure for sure, to Greg's point earlier, there are many segments to this business, right? For obvious reasons, during the credit crisis, financial institution prices escalated significantly, right? At other kind of inflection points of exposure around option backdating or IPO laddering over the course of recent time, we saw meaningful rate change. Then, we saw a broad rate change and broad market change in 2002, 2003, and 2004, at least for our portfolio. Again, as you navigate the world, they're all different markets, different sets of competitors for sure. What I can say is that we're going to continue to push price. Again, our focus is on maximizing the return in that space. It'll be different by product and by geography. We feel like the momentum is good, and I think for us, in the D&O space, it's 2.5 points of rate in the U.S., right? It's not a meaningful movement at this point in time. It's far better than it was in the fourth quarter and better than it was in the third quarter. We expect to continue to push price as we move forward. Continue to push. I expect us to continue to push price. Well, it's a broader market movement. I mentioned that risk-adjusted profitability is our primary metric. An important metric for us too is a view of the business over a reasonable timeframe or RAPOR, we call it inside. Some of you have heard us talk about it, risk-adjusted profitability projected over a reasonable timeframe. This has been a very good business for us, right? One of the elements of art in our business is measure our appetite for a substandard result in a relatively short period of time when we think we have confidence that some of the distinguishing characteristics about us as a company will enable us to generate a better result and a more meaningful result over time. If six months from now, there are 75 markets, maybe there's a bit more pressure. I'd be surprised if that were the case. If I think of from markets 40 to 60, I have to be scratching my head about where we're headed here, right? Having said that, as Greg said, he's five years into his new venture. I don't know what the average duration is on Greg's book, but if he's an excess market, he's settling claims for the first time now on average, right? It takes a while, obviously, for some of these companies to start to see whether or not they're pricing the business adequately. I think it's also correct if we gave you the wrong impression. The business has been a very profitable business over that timeframe. That's right over those years. Yeah, that's a misimpression. We've been reporting calendar year combines over the last several in the mid-80s. We all recognize the accident years and margin and margin compression and where the generation of profits forward are. In order to provide an adequate return to shareholders, we all need more price. Most of the market players are rational players. I'd expect the market to behave rationally, and rational would suggest what you said. Yeah. I was just going to build off something that Craig just mentioned. We're a private-owned company at this moment in time. Looking out since we formed, the valuations of insurance companies have only gone down in the public marketplace, and there's a lot of management teams that are in charge of companies that are either trading around book value or discounted to book value. The ROEs for the industry, I don't think they've been terribly rewarding necessarily, and I'm talking the general industry, not some companies are standouts on their own accord, than what is comparably investments in other industries. There are other industries the last few years that have yielded much better returns for investors than the insurance industry. I think there's management teams sitting in these companies now that have to realize that if we either get something going here and get back up over book and start making people interested in what we're doing, or we're going to get passed over. I just think there's a lot of pent-up frustration with the way that the company's performed with the returns in the industry. I just think some management are going to take a lead on that, and they're going to do it sooner than later. I would hope the responsibility and some of the great leadership we do have in this industry take it forward because it's got to come out of the doldrums on the trading values, I think. You're seeing calendar year results under pressure, right? Yeah. We talked about the returns on the business, reserve releases from that period of time have begun to abate. That'll add to the pressure for sure for companies in the space. I guess more for Craig and John. Pricing versus retention, how low are you willing to let retention go or how hard are you willing to push rate to the extent that it compromises retention? How do you think about that balance? Is that more output, or is that something that you kind of keep your eye on in terms of determining how much more opportunity you have to adjust pricing? That's a constant balance that we're trying to navigate by product. I mentioned risk-adjusted profitability versus RAP versus RAPOR, the metrics at AIG. I talked about our tolerance maybe in a given calendar year or accident year for a substandard result is going to be different by product, right? That is going to be driven maybe in part by our longer-term view of a product. Maybe financial lines, again, given our view of how we're positioned in that business, and our confidence in our ability to deliver better than average returns over a longer period of time, and it's important to our customer and distribution relationships, overall value to our franchise. Maybe you put that at one end of the spectrum, single state monoline work comp in the middle market would be, for example, kind of at the opposite end of that spectrum, right? We've gone from $3 billion in that work comp segment of our business to $700 million, right? Driving a better result there frankly, without concern about retention is what we're trying to accomplish there. That's the balance, and we're constantly stressing our assumptions. If we're at 7% rate change and we move to 10% rate change, how is that going to impact retention in that product, in that geography, and what does that mean to our targets overall? It's a constant balance and, again, our assumptions, and our tolerance for shedding business or retaining the business is going to differ depending upon the line. Craig? Well, let's, I guess, start with the kind of underlying truth, right? Of you can't make it up in volume. Right? You've got to make a profit on the business, and really the level of retention we would think is healthy and rate depends on the profitability and the returns of that product and geography. It's going to be different. I'd say while rate and retention metrics are kind of key indicators of the general health of the business that we would look at, and I think that you all would look at, what really drives our metrics or targets for rate and retention is going to be profitability. Those are going to be different by product and geography. All of those are going to be, at the end of the day, sacrifice for getting a retention is going to be sacrifice for getting rates so that you can make a profit. There's no reason. Certainly, customers pay you for absorbing risk, but there's no need to be apologetic about needing to make a profit, I don't think, in this business, and at least producers and customers that I talk to aren't offended by that concept. That's what drives the trade-offs and determination. There's no magic balancing act there. Great. One question up here in front. Thank you. How much is your pricing dependent upon your reinsurance capacity in general, and have you seen terms and conditions change a lot there, just given potential concentration risks and the like? That's one part of the question. Secondly, is there any type of capacity for doing multi-year types of contracts where there would be some type of pricing adjustment mechanism based on performance? Thank you. She was kind of looking at me. Yeah, on the reinsurance side, we're a reinsurance buyer. There are a lot of players in this industry niche that are not insurance buyers. They go completely net in either certain products, or they go completely net across their whole book. I worked at one time for a company that had made that decision to go net. That's how much confidence, I think, existed in the historical trends of this industry, to give you another idea of why people come into it, even number 60. The reinsurers, I think, exhibited a tremendous amount of restraint and discipline after they went through the pain of the '98 to '02 cycle. To some extent, when those rates went up, other bigger carriers with a whole bunch of capacity, their own capital that might've been underutilized, dropped reinsurance. I can tell you, we're an avid supporter of the reinsurance market. Makes sense to us. Our company has a very large capital preservation priority above most everything else. The terms we get are generally fairly consistent, pretty much follow our fortunes. I do know that there are treaties out there that are much narrower, depending upon where these companies have planted their flag in which part of our industry. What was your second question again? I'm sorry. Multi-year. Multi-year. Oh, multi-year. I'm sorry, yeah. There are some private company transactions I've seen in the business where they'll do a 2-year commitment to a private company. I have to say, I don't think there was anything that probably put this industry sector up in smoke than the multi-year policies. My mother didn't raise an idiot, but I'm not smart enough to be able to tell you what the economy is going to look like next year. Our presidential contenders may, but I can't. We're very economic sensitive. When the economy goes sour, what's the Warren Buffett thing? When the water goes out, you find out who's swimming naked. That's what happens when the economy goes sour in the product lines we're in. You find out which lawyers didn't do contracts right. You find out which management teams were stretching numbers. You find out a whole bunch about your insurers that aren't as visible when times are good. I think when you go into the multi-year commitments, you're committing at a rate for a future year that may have no relevance to the rate, depending on how the risks change. I think it's a terrible practice. We got one minute here to wrap up. I don't know if Craig or John want to address that question. I don't know if Greg was referring to our company, but we buy almost no reinsurance, right? It's not a factor for us, but it is clearly a market factor, right? That capital out supporting, who knows, companies 10 through 60 or something, in sometimes a material way, right? It does play a role in the overall economics of the business. I agree with Greg. There are some segments of the business, again, it's easy to talk about public company D&O, but other segments of the business that maybe are less economically sensitive and have generated more consistent results where you can structure some things, and maybe they're outside of the U.S. too, as an example. To Greg's point earlier, you look at some of the things that have impacted public company D&O results over the last 10 years, whether it's Eurozone issues, credit crisis, IPO backdating, IPO laddering. It's hard to project some of those kinds of events. To be locked in contractually can create some real challenges for you. It's by and large, that's a one-year business. I think that's similar to John. We're a gross line underwriter. We buy no reinsurance professional liability. We manage, which puts the pressure, I think, appropriately so on our underwriters to manage individual risk and aggregate risk in a way and ensure there's diversification and lack of volatility to deliver the appropriate return without that dependency. I think it's actually a good discipline and been a good practice for us. Not to say we wouldn't in some terms or don't value reinsurance markets. We do use them in other product lines that we have in here. I think if brokers and customers are asking for multi-year, that's a good sign, I think. I think we're going to wrap up. I'd like to thank our panelist, Greg. It's nice to, shortly after Mother's Day, to recognize your mom here on the panel. Thanks. I bring her up all the time. I'd like to give our panelists a round of applause. Thank you very much. Thank you for your participation as well.