My name is Ed Spehar. I cover the life insurance stocks for B of A Merrill, I'd like to extend my welcome to all of you to our annual insurance conference. Our next speaker is a very impressive guy. He had a long, successful career at MetLife, then came out of retirement to take on arguably the biggest challenge in financial services. We're very happy to have Bob Benmosche, CEO of AIG, with us today, especially considering that the company has not reported fourth quarter earnings yet. We really appreciate him coming up in front of us and presenting and taking questions. With that, I'd like to hand it over to Bob.
Thank you. First of all, good morning, everybody. I'm going to read this very carefully, then you have to fill in a test question to make sure you understand cautionary and the future. That's number one. Number two, while this statement's up here, as Ed said, we haven't announced earnings yet. I said, now here I'm going to get before this enormous group of people, they're going to sit there and they're going to say to me, "What can you tell me?" I was thinking about maybe I could tell you about the fourth quarter, then we could all bunk out right here and wait till we announce, which probably is not a good idea. I'm going to ask you to please help me stick with the third quarter and before. Is that okay with everybody?
I don't want to disappoint you. If you were expecting me to talk about the fourth quarter in any way, I'm going to do my best not to. I hope I don't make a mistake, the lawyers are ready to start sending out 8-Ks if I do something wrong this morning. Hopefully, I don't do that to our lawyers, God forbid. Who would've thought that we would be here today? How many of you go back to the end of 2010, we were talking about AIG, you said, "It's finished. It's over." Who would've thought we could actually complete our restructuring? Who thought we could raise capital during the year? Who thought we could build our balance sheet? In fact, if you look at the things we did, we got to almost $38 billion of activity during 2011.
That was accomplished during this year. Keep in mind, go back about 12 months ago, just as we got into the end of a little bit more than that. Let's go to the end of November of 2010. Most of you in this room did not think AIG was going to make it. By the end of November, when we were heading into January to do the restructuring to pay back the Federal Reserve in full, all of a sudden people said, "Man, they actually may make it. They may actually do that." All of a sudden, people realized what happens when you have a large company with a tiny float. What happens when you short the float and there's come in. Warrants. What are they doing?
Yeah, we had a problem at the end of the year where you saw the mountain appear at AIG, and the stock went from in the mid-30s all the way up to the 50s because people didn't understand how to be able to cover the warrants that were going to be issued in January because by golly, they're going to be here. When you talk about our performance, I wish you would all go back, and the press doesn't want to do that because it's always good to say we're not going to make it, because they're sure we're not going to make it. You look at the mountain from the latter part of November till January, when we actually closed the deal with the Federal Reserve, gave them back all of their money, and actually gave common shares to the U.S. Treasury.
At that point, AIG had no more recourse. There was no more recourse to AIG by the federal government. Even today, when we talk about AIG, there's no recourse. If the government doesn't sell those shares at a profit, you can't come to AIG and say, "We need more money." If the SPV, which I'm going to talk about in just a minute, isn't covered, they can't come back to AIG and say, "We need more money." It's all there, and that's actually the positive part of the story. That was accomplished in January. Then, of course, we go through, we sold Nan Shan. I can go through a whole list of things. Another event that I want to highlight is in order to be completely free, we had to prove that we could access the equity markets and raise equity capital.
A lot of you said, "Why is AIG going out for 100 million shares? Why are we adding more to our dilution, if you will, if we have plenty of liquidity and we're in great shape?" You ask, "Well, why would you do that?" Because we had to prove to the Federal Reserve that we could do it. They said, "You must prove to us." Now, the U.S. Treasury accepted the responsibility in doing the restructuring in January that they would make sure that we did that. They gave us a Series G preferred, $2 billion to satisfy Moody's and so on. From there, we had to demonstrate we could do it, and we did that. That was the last obstacle, if you will, to being a free and independent company growing again. This is what's been accomplished, a huge amount of money, heading to $38 billion.
We talk about our capital structure, $86 billion of it is equity, $86 billion. You may challenge the book value of this company, and I suggest you keep digging, but we believe we have a very strong book value of this organization. Our liquidity at the end of the third quarter was about $15 billion. We have strong liquidity, and we have strong capital. You have some concerns. By the way, I want to get through this pretty quickly, and I'm going to try to accelerate myself because I really want to get to your questions. Some of this stuff you've already known and heard about, so it's just rehashing some old things. One of the challenges we had, who would have thought? Who would have thought that AIG could be an investment-grade company without the support of the United States government?
In December, I can assure you, one of the rating agencies said, "You've got to be kidding me. You think we're going to leave you with the rating you have with the full, not full, but $30 billion of government support? You can't be" They get like that when they get upset. They can't speak straight. I said, "Calm down a little bit. Yeah, I do." They said, "You can't give up $30 billion of support from the United States government and all of the implied support of the United States government and think you can't be downgraded." I said, "The company stands on its own. It's in great shape." That one agency took us down one notch and went from negative to stable. Everything else stayed the same. We have strong investment grade.
If you look at AM Best, just announced, Fitch also talked about the fact that we're now going into a positive trend, and we expect that to continue across the board as you look at these ratings of the organizations. Let's talk about the businesses real quickly. Chartis, who would have thought that you go through a financial crisis, the headlines that occurred all over, and who would have thought you could retain 90% of your customers? We still do business today with 97% of the Fortune 1000. This is not about getting clients. It's about doing more with clients. A lot of you said, "But I know what you did wrong at AIG. You gave away all the business. You guys were killing the market. You kept cutting rate and cutting rate and cutting rate. That's why you have a reserve problem. We got you.
We caught you." That's what everybody's been saying because you couldn't have retained 90% of the customers if you weren't giving it away. The fact is that that's just not true. We've demonstrated that with the data. They stayed with us, and I'll tell you what some of the biggest companies in the world tell us. What they've told us, me in particular, as I visited with them, "Your people have been outstanding during this crisis." In the end, if you take in $33 billion in premium, you got to pay it out if you've got a combined ratio of 100 plus. It's called claims. To fill out due claims in this business is hard, and we have experienced and skilled people to do that. They stayed with us because we actually are value added to them, not just the cheapest prices they can buy.
What we did not do, which we are now doing, is we didn't increase rate. We were concerned. People were concerned throughout it. We got 4,500 underwriters. Do you think if you were one of those underwriters that you were willing to take on a Fortune 100 company, a risk manager, and say, "You're not paying us enough. I don't care if they think we're going broke. I don't care if they think we brought the financial crisis to America. I'm raising it five points here because we're not covering our cost of capital." And willing to lose that client in the middle of the crisis when they think that the client left because of reputational issues? Would any of you have done that? Of course not. What they didn't do is go down, even though you all thought that. We have retained an enormous amount.
We are clearly, as you look at our international business continuing to grow, consumer business continuing to grow. Don't try to give us a single expense ratio. You got to look at the differences of consumer, commercial, and so on as you do your analysis. The fact is we said early on in 2011, we're going to leave the increase now because we're ready to start raising our prices, and we want to make sure that we get a risk-adjusted profitability in Chartis, which means at least earn your cost of capital. Don't kid yourselves that you can earn money in investments and other things outside the combined ratio. Get it right and earn your cost of capital, and then make a profit on top of that. SunAmerica, look at the positive flows we've had. Enormous flows.
Again, there was a belief that we're going to a big run on the bank. It just hasn't happened. We're back in all distribution systems. We're back in banks, and we're still the leader in the banking system. Oh, that's what it is. Low interest rates. I forgot that. You guys don't understand. Interest rates are down. It's going to kill your business. The fact is, people still need to do something with their money. Sooner or later, how long are you going to sit there when eventually some places are starting to think about charging you for the cash you leave with them? How does a bank pay you for a deposit when they have to pay 14 basis points of FDIC insurance and all the other costs? Do you know that half of the accounts in retail banks today don't even cover their variable costs?
Forget about allocated costs and everything. They can't even cover the variable costs. Sooner or later, that money's got to start working, and people are sitting there saying, "I got to get something." If you believe in the Fed and the low interest rate environment over time, people still put their money in annuities. They still want variable annuities with guarantees. Our challenge is to price it right, and we do price it right. Everything we do is in that 11%-13% range on an ROE basis, and we're working hard to accomplish that. You'll see good pricing throughout. We see good retention of business throughout. We have one client, for example, how do we do this? We have one client, major bank, who said, "We just don't want to give up commission. Commission is very important to us." Okay.
We showed them that we price 240 different basic clients, 240 every Monday, for a combination of price to the consumer, price to the distributor, as well as price to us. You can do whatever you want. That's one of the features we have that's hard to replicate besides our size and penetration. This institution was told, if you trade off your commission and put it into the rate to the consumer, you will see a significant increase in your business. You still got to feed the troops out there. You still need production. Your clients need product. You can do that. This major institution decided to give it a try, and instead of doing $200 million in sales in 2011, they did $2 billion. We didn't give up our spread. We can't do that.
We got to get a return for what we're doing, or it doesn't make sense to do it. What they realized was that they could do a lot more volume and still make a lot more money and begin to absorb some of their overhead and so on down the line through the product. When you think about fixed annuities at AIG, it's not taking on more risk in the investment portfolio. It's about how we redesign the front end of those products. We have 1,000 people, and I joke with these people because they said, maybe they think Amarillo, Texas is a third-world country. We have real quality people in Amarillo, Texas, and they're competitive to any organization around the world. A little bit higher cost, but we're getting enormous value out of those people.
That gives us a maybe 20 to 30 basis points advantage from the cost side. That's a lot of risk we don't have to take on our books to get our yield. It's huge. As you think about interest rates and fixed annuities and so on, we price it right. We got the flexibility on expenses, flexibility on pricing. We're quite unique in this area. For anybody to get up to speed to compete with us, I can't imagine them standing here before you and saying, "We've decided to take on AIG in the banking channel, and it'll take us three to four years to get ramped up in the fixed annuity business when we're looking at low interest rates and possible disintermediation coming down the road." I think the barrier of entry is pretty high here, which is good for us as we grow that business.
United Guaranty, I got to tell you that we really redesigned how we do this business. We have a multivariate model, similar to what was done in the auto insurance industry. We have 17 variables in there. We ask questions. I've shared with some of this before. Do you have two wage earners in the household or one with two jobs? We determine whether that gives you better predictability of payment. We look at loan to values. We look at FICO scores. We look at geography in 330 different municipalities. A whole lot of other data, which I don't wish to share, to begin to look at the probability that we're making a good insurance bet on that person, on that home. I will tell you, we've had now almost two and a half years of experience with the new model.
We're getting ROEs north of 20% in that business. We feel that now that there's settlement and foreclosures, we're going to see the rest of that flush through the system. We'll be able to get our reserves back to what would make sense for on a go-forward basis instead of the historical problems. You will see United Guaranty emerge over the next couple of years as a strong business. We're now the number one writer of mortgage insurance, and we have the best loss ratios. I would have thought we would have reduced our market share because of the way we're doing it. We're actually increasing it because especially smaller banks throughout America want to get it insured, get it done, get the right price, and they want to go on.
We've actually introduced a new product that says if you come to us and pay a fee, we will examine the mortgage we're insuring, and not only insure it to you, but we will make it rescission proof. We will tell you that no matter what happens in the future, if they lied, they cheated, whatever mistakes you made, we will tell you, once we look at it and do all the analysis, we'll actually tell you that that cannot be rescinded. What an assurance that we're going to say to people, one, you don't have to worry about your reserves at the bank anymore. You know it's never coming back, and for a small fee, we'll do that for you. That's becoming very popular as well.
We really have rethought how this old business works, which is why we want it to continue to be a core part of AIG. Another reason is it gives us an enormous window into the mortgage-backed market. When you think about our investments in RMBSs and so on, agency, non-agency, whatever, this is how we'll get insights as to where we want and how we want to be able to deal with that investment because you're still getting above-average returns if you get it right. You just don't want to pick up a bag of stuff that isn't good, and that's what we're working hard to do. I said I was going to go fast. I'm going slow, so I apologize. Anyway, if you look at FP, who would have thought we could get through this? 89% reduction. We could not have closed with the Federal Reserve.
Everybody says, "FP is going to come back to haunt you. They have FP assets there. They have derivatives there. Did you look at other insurance companies?" You can't live without derivatives. It's actually a good product used the right way. We've obviously reduced it. The Fed would have never let us out. There's no way we could have gotten done. There's no way the rating agencies would have given them the ratings we had if we didn't get this thing de-risked. Look at where we're at. It's just not a problem. It's an opportunity. Had we done what we were asked to do in 2009 when I got there, we would have lost between $10 billion and $20 billion to do that in the timeframe given by the government. $10 billion to $20 billion loss. I think the ten was optimistic.
We finished, after two years, a $4 billion profit. We wouldn't be here today as an independent company had we just executed the close down at the speed that everybody wanted of Financial Products. This team did it the right way. In spite of all of the difficulty of seeing themselves in the press about their pay and their bonuses and their compensation, we were fortunate to have an enormous team up there in Connecticut that stayed focused on getting us de-risked and getting us down and doing it the right way. It allowed us to be here because I tell you, if we're short of $20 billion today, we just couldn't have done the restructuring. Couldn't have happened. It was a huge difference for us. As we look at our SPV, here's what we have in that SPV.
Let me be very clear that this is a non-recourse to AIG, but look at how much money we could get once we've paid down the remaining, it says $8.4, but against that $8.4 is about $1.5 billion from the MetLife sale, this allocated to MetLife, that's in cash, in escrow. You've got to wait for that escrow to get done. It's just cash sitting in there. It's really about $6.8 billion. $6.8 billion, if you look at the book value of ILFC and so on, there isn't much to be able to pay that off entirely. The rest of the collateral comes back. When somebody says to me, "Why aren't you selling AIA?
Sell AIA and get rid of that." The problem is, it's not in the shareholder interest right now to do that if all we're going to do is pay down the SPV and give up 5%. We have time, if we do it appropriately, to take this year to think it through and think about AIA strategically vis-a-vis AIG and make the right decision at the right time. You've heard or seen a lot of publicity on that. We can, for example, if we can deal with the IPO of ILFC, if that can happen this year, and it's enough cash and some other cash comes in, we have a shot at paying down that amount. We could think about using the proceeds if we decided to sell AIA, potentially for capital management, meaning we could buy some of the overhang from the U.S.
Treasury, which would be part of a deal that everyone would be part of if and when the U.S. Treasury decides to do that. Aspirationally, we talk about our ROE. I can only tell you that we're confident about our aspirational goals. We believe we're going to get there. We believe that these are very attainable, and that's the walk to get there in some of the things, but I'll let you decide. Clearly, the opportunities are emerging in Global, and the reorganization of Chartis is going extremely well. Our investment strategy, look, we had to overcome a huge problem in the beginning of this year. We were sitting with a ton of cash and no Maiden Lane II, which we thought we were going to have as part of the restructuring deal. We played catch up. We did some really smart investing in here.
A lot of people think a lion's share of Maiden Lane II is still owned by AIG after the auctions. That is not the case. It's a fraction of what people believe it is. Most of our purchases we found early on, we could actually buy from institutions when the markets improved in here in the first half. We were able to go to banking institutions that wanted to reduce their risk-weighted assets a little bit, and we got some really good, high-quality mortgages, higher quality, I should say, than Maiden Lane II. It isn't just going out and buying Maiden Lane II a different way. We've done other things but bought some of the Maiden Lane assets. Again, capital management, I've shared that with you. You saw some of the numbers, what we can achieve.
Last but not least, as you think about cost reduction, we're well on track to get that done. That's pretty much a quick rundown of the story. I think I've left enough time for you to let me answer some questions if I can help you out. I guess it's a quiet group.
We won't let you off that easy. I'm sure others will follow up as well.
Oh, wait a minute. There's somebody in the back. I'm sorry. There you go. There we go. The only one that knows the fourth quarter, I know that.
Hi, thanks. Had a quick question about AIA. You mentioned that you were planning on taking your time and considering it and thinking what the strategic position of it might be. I wonder if you could perhaps give us an update on what your current thinking is about the position of AIA and where you stand with that.
What I just said, I think AIA is a position that we have that's worth about, I don't know, $12 billion-$13 billion on any given day. It's encumbered by the SPV. If we sell any of AIA, it goes to the SPV, can't be used for any other purpose but the SPV. We think it pays to wait so that at the time we're free to do what we need to do with that position, I can't tell you until the time comes. If all of a sudden AIA shares, there's a cold comes over Asia and AIA is back down to HKD 20, I mean, HKD 20, yeah, and AIG is sitting at $29, it's going to be pretty tough to want to sell at that point and buy AIG shares. Just would be, I think.
We would have to ask ourselves, what are we going to do with the capital? Because we got capital. You heard us say that maybe a way to get out of the volatility, because it is volatile, the way you solve that problem is you buy back the 51%. Once you're back to 51%, volatility goes away. That's an option. I just don't know. What we do do, it will be in the interest of our shareholders. People say, "Well, how's the U.S. Department of the Treasury going to feel about that?" They're a shareholder. Anything we do to drive shareholder value is good for the U.S. Department of the Treasury. They're aligned, they're a shareholder. You know what? They're a shareholder that wants to get a profit for the American taxpayer. They're not trying to maximize an investment.
They're not worried about capping it out because they think you've peaked. Look, I'd rather have the U.S. Department of the Treasury, quite frankly, as our shareholder than some of the activists you read about every day who decide that, "We just got to get a return on our investment. We really don't care about your company." One of the things I did learn early on from Wall Street, it's a very simple rule. All of you in this room are not looking for great companies. You may find one, and that would be wonderful. It has nothing to do with your decisions. You are looking for a great stock. You want to buy that stock, you want it to go up, and when you feel you've gotten enough out of it, you want to get out of it. You are renters. You're not owners.
Some of you are, usually, you're an owner because you're trapped. I'm looking and thinking about owners, and I'm thinking about the fact that I want to have a great company, and I have to have a good stock that you're all interested in. The U.S. Department of the Treasury is an owner, and they want to get out for profit for the owner, being the American public. That's a good place to be. I'm glad to have them as a shareholder, and there's no problem for the company.
Yeah. Bob, can you elaborate on the various levers to get the return up? Capital management, that's the bulk of it, $25 billion-$30 billion. Is it simply a matter of having too much capital trapped there, share repurchases? Maybe you can also elaborate on Global opportunities.
Sure. I think, first of all, the getting the ROE up. Okay, clearly, we've over-solved for making sure we have enough equity. People say, "Are you worried about being a SIFI? Are you worried about the Federal Reserve?" No, I welcome it. I welcome it because one of the strategies we have here at AIG, we have an opportunity that most insurance companies don't have. An enormous amount of money sits at the holding company, not at the regulated insurance entities. What we've done is come up with capital maintenance agreements. We've got 29 in force today.
Our goal is, over the next year or two, begin to show a lower RBC, BCAR, what have you, within our organizations to maintain strong investment-grade ratings on the basis that we have a strong liquidity program at the holding company that can assure the regulators and the rating agencies that if cash is needed, if we wind up with a huge Hurricane Katrina and Hurricane Rita and so on, Hurricane Irene joins the group in the same year, Chartis is sitting here with about a $3 billion-$4 billion nut, we want to make sure that that can be covered by the liquidity at the holding company. To the extent we can get the Federal Reserve to come in here, we're running the test, just like it was announced.
I'm going to talk about it on the call, next week or whatever it is when we do our call, I'll talk about the results of that using the Fed stress test, including for us, it's not only the markets, but it's also what happens when Hurricane Irene comes in the middle of that. We actually had a mini stress test in August. Look what happened to the equity markets, look what happened to the fixed income markets, Hurricane Irene came at the same time. It validated our stress testing, what we do. If we have the Fed in here watching what we do, I think that's important to give confidence of the holding company being run the right way, that allows our liquidity management to be stronger. It allows us to lead a little less capital in this organization to maintain our ratings.
All of that allows us to be able to get the ROEs up. In addition to that, we've got to continually focus on growth economies. We've got to continually focus on doing more consumer business around the globe, which we are through Peter's organization. We got to continually make sure that we understand our cost of capital and are getting at least a return. It's no longer about top-line growth. We can't hide problems with our combined ratio with investment. We don't have those kinds of returns anymore. This game's over. You got to get your combined ratio to where it makes sense. Investments can help a little bit, but not a lot. That's all part of getting the combined ratio, which you've seen in a 95 range or below on a mixed basis.
In terms of our aspirational goals, we got to continually invest in the future. We have not invested in technology. Here's an example of what we're doing. We have 27 million workers' comp claims that we have paid, and we have never done a thorough analysis of the 27 million. We're now working with Johns Hopkins University. We're examining those 27 million claims. What are they telling us about the pattern of what solutions should be there? How do we get people back to work and so on? We're going to do data mining like we've never done before. That's going to drive our expenses up. At the same time, we're building new financial systems and so on to take some of those expenses down. We'll drive expenses down over time. $1 billion is in that number.
It's really about how do we become smarter and better using predictive modeling and so on, like we did in United Guaranty, to run this business more effectively. It's a combination of things. Yeah.
Regarding ILFC, we recently saw RBS sell off their aviation business, there was a lot of interest from some third-party buyers. I'm just wondering if you've seen a renewed interest in ILFC from third-party buyers, and do you think that's a way to realize value, or do you think the IPO offers the best route?
We always have interest. People call up. I still think that people think they can bottom fish, and it's okay. We'll entertain any. If the question becomes who. Remember, ILFC is big. You're dealing with about $35 billion in planes. I cannot remember the debts, about $21 billion or something like that. You're dealing with a big nut in here. I will do what makes the most sense for the company, and we'll examine everything. We're still focused on operating results, getting it right. I think I shared with all of you the part of our strategy works. The markets aren't quite there yet. A little noise in the aviation market, with American Airlines and Spanair and so on. We want that noise to go away, show how we perform.
That won't be known because it's all happening in the first quarter. We got a few more months to go before we go public with that. We'll see how all that shakes out and how we're looking and then go to the market when the market gives us the price we need to be able to deal with the strategic objectives of the SPV. I think I said that right to the lawyers. Last time, I put some numbers out there I wasn't supposed to.
In a recent meeting with Peter Hancock, he indicated that you're still in the midst of getting the systems up because the prior accounting of AIG is a bit lacking in terms of tying everything together. He said that you are still in the midst of it. Can you give us an update as far as coordinating worldwide reporting, et cetera?
Yeah. We do it, okay? It takes about 6,000 people to do it. It's a huge cost to this company. We are now focused entirely on Europe. Our first implementation will be in the U.K. We want to make sure we get Solvency II done and make sure we got all the right systems and the right process. That was supposed to get done in December. We wanted to be a little bit more careful. That's going to go in the next two or three months to make sure that it's really as perfect as we can get it, and as practical and perfect, I should say. That will begin to roll across. That's a major piece of activity that will go live. Of course, we have other things that have gone live.
In the meantime, we're building technology for our investment group. We have not had the right kinds of tools to manage our own general account and so on. Those tools will be implemented this year or next year. It's not a big bang. We're getting things done periodically as we go through it. I think this will evolve and get better. It's not going to be a big there it goes. We're in the process of doing it, so we're making good progress here. Anything else that I can?
Well, Bob, since you mentioned Europe, I'm wondering if we could go a little bit bigger picture and get your take on the situation in Europe and how you think it might play out.
Well, look, the fact is you got 28 now that Croatia's coming into the European Union, in case you didn't know that, I want to make sure you all understood that. That's where I have my home, that I used to go to a lot of times when I was retired. You got 28 countries that are trying to act as one. We got a lot of experience here in America, and you can't get 50 states to work together, and you can't get just two parties to work together in Washington. How are you going to get 28 nations that have a lot of history to work together? Kind of amazing to think about what they have to accomplish. I think they will get there. It's a question of speed, and you just got to get used to the way they do things.
I believe that you cannot have any change, especially in government, unless there's a compelling reason for change. It's got to get painful. I think it's starting to get painful. Not enough here in the U.S. yet, because they still think there's some issues with retirement ages have to go up and a whole lot of other things to fix what we've got here fundamentally. I think Europe is feeling that pressure, you can see the positive nature of people realizing what's going on in Italy, if you look at Greece and the issues of Greece. Look, I got to tell you, when you sit down and have a cup of coffee in Paris, I had one about a week ago, it's $11. $11 for a cup of coffee. You know what?
If you want a second one, they charge you again. There's no such thing as a fill it up. We fill it up, you pay.
It's cheap.
It's cheap. Yeah, it's cheap. When you think about what's going on out there, I got to tell you that Europe is trying to wrestle through that. In Croatia, it's $10 a gallon of gas. Here in America, we're crying about gas getting to $4 a gallon. They're paying $10. There's some fundamental issues there that we don't see here in this country, and I still think they're getting it balanced. They'll get it there. I think they'll get organized, and I want to think the crisis isn't as bad as we're making it sound to be. Yeah, in the back.
There's increasing discussion around cumulative loss estimates for Thailand. In the past, I guess AIG has discussed its market presence in Asia, et cetera. How exposed are you to Thailand, and what are your expectations around cumulative losses today versus maybe what your previous thoughts were a few months ago?
I will tell you that next week. I think that overall, we're looking at our catastrophe load. We're looking at our reinsurance contracts. We're thinking about that strategically in terms of what we really need to budget for going forward. You saw that Peter just hired a chief science officer. We're going to start studying the data around the globe to really start to get an understanding of what patterns are happening out there. Specifically about Thailand, you'll have to wait till we're ready to announce for the fourth quarter. I'll tell you one of the things strategically you have to think about, I think it's okay to say this, that we have to look at it with Irene and other catastrophes. We have to look at the urbanization of the world and what it means to the one in 100-year, one in 250-year events.
I can remember when I was at PaineWebber, and I was running the operations and technology group in Weehawken, New Jersey. Our computer center is right there on the Hudson River, right here across the river, and the Hudson River doesn't flood that much. One nor'easter came up here, and the river was frozen, and there was no place for that water to go but up and over. We just were within three inches of closing our technology center with no backup. The world is changing on us. Things are different. There's less places for stuff to go to, and that's what happened a little bit in Thailand. Too much urbanization. What normal would be is no longer normal. We are studying that around the world to understand that better as we look at what's happening over time.
Okay.
I'm out of time. I thank you all very much.