Earnings Call: Q4 2020

Feb 3, 2021

Good morning, and welcome to the Markel Corporation 4th Quarter 2020 Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. During the call today, we may make forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They are based on current assumptions and opinions concerning a variety of known and unknown risks. Actual results may differ materially from those contained in or suggested by such forward looking statements. Additional information about factors that could cause actual results to differ materially from those projected And the forward looking statements is included under the captions Risk Factors and Safe Harbor and Cautionary Statement in our most recent Annual on Form 10 ks and quarterly report on Form 10 Q and earnings release filed on Form 8 ks. We may also discuss certain non GAAP financial measures in the call today. You may find the most directly comparable GAAP measures and a reconciliation to GAAP for these measures in the earnings press release, which can be found on our website at www.markel.com in the Investor Relations section. Please note this event is being recorded. I would now like to turn the conference over to Tom Gayner, Co Chief Executive Officer. Please go ahead. Thank you, and good morning, everyone. And thank you is the key and operative word to start off this message. The 18,000 employees of Markel turned in a wonderful performance in every dimension in 2020. And I just want to start off the call on behalf of Richie and Jeremy and everybody thanking the associates of Martell for their work throughout 2020. It was not an easy year. Markel is a holding company, and I think the thing that we hold most dear are our ideas and our values of taking care of our customers and our associates. We think that creates a win win win architecture, where our associates win by being part of Markel, our customers win by doing business with us, And our shareholders win because when we do those first two things, we produce good returns on capital, and we think that is the ultimate form of sustainability. All three engines of Markel fired in 2020 and provided positive thrust, but it might not have seemed that way at various points of the year, especially early on in the early days of the pandemic. The great philosopher Mike Tyson said, everybody has a plan until they get punched in the mouth. Well, we got punched in the mouth in the early days of the pandemic, but our plan is to build Markel in such a way that we can take We can get in the ring with Mike Tyson. We can take the punch in the mouth and keep on fighting. That's 2020 in a nutshell. Markel is a resilience machine. Our 3 engines withstood the blows from the early days of 2020, and our 18,000 plus associates adapted and figured out how to recalibrate and accomplish our mission of taking care of our customers, our associates and our shareholders. I'm pleased this morning now to spend a little time with you Reviewing the results, and with that, I'm going to turn it over first to Jeremy Noble, our CFO, to discuss the numbers. Richie will then talk about our insurance operations. I'll hop back on to talk about investments and ventures, and then we'll open it up for your questions. With that, Jeremy, thank you. Thank you, Tom, and good morning, everyone. Following a year that reflected significant volatility and widespread impacts attributed to the COVID-nineteen pandemic, We are proud of the results we delivered across all three of our engines in 2020, which demonstrate the strength and resilience of our businesses. Our underwriting operations delivered an underwriting profit despite elevated levels of catastrophic events and significant losses attributable to the global pandemic as we benefited from achieving meaningful rate increases and growth in new business. Our Markel Ventures operations saw strong top and bottom line performance amid challenging economic conditions and we achieved solid investment returns despite volatile market conditions historically low interest rates. Looking at our operating results, gross written premiums were $7,200,000,000 for the year compared to $6,400,000,000 In 2019, an increase of 11%. This increase was attributable to our insurance segment, which reported gross written premiums of $6,000,000,000 an increase of 13% compared to a year ago. This premium growth is attributable to both new business and improved pricing Within our professional liability and general liability product lines as well as our personal lines in marine and energy product lines, gross written premiums with our reinsurance segment We're consistent with 2019 at roughly $1,100,000,000 Year to date retention of gross written premiums 83% in 2020, which is down 1 point from 84% a year ago. Earned premiums increased 11% $5,600,000,000 in 2020, primarily due to higher written premium volume in our insurance segment. Our consolidated combined ratio for 2020 was a 98 compared to a 94 last year. For the Q4 2020, we reported an 89 combined ratio compared to a 93 a year ago. Our full year 2020 combined ratio included $360,000,000 or 6 points of underwriting losses attributed The COVID-nineteen and $169,000,000 or 3 points attributed to natural catastrophes. This compares to $100,000,000 or 2 points of catastrophe losses in 2019. Excluding the impacts of COVID-nineteen and natural catastrophes, Our combined ratio for 2020 improved due to a 3 point improvement in our attritional loss ratio and a 1 point reduction and our expense ratio arising from improved performance within our insurance segment in 2020 compared to 2019. With regards to prior year loss reserve development, consistent with our reserving philosophy, prior year loss reserves developed favorably by $606,000,000 in 20.20 compared to $535,000,000 in 20.19. Turning to our investment results, net investment gains included in net income $618,000,000 in 2020 compared to $1,600,000,000 in 2019 and were primarily attributable to an increase in the fair value of equity securities, which experienced significant market volatility during the year. The impact of significant declines in the fair value of our equity portfolio in the Q1 Driven by unfavorable market value movements resulting from the onset of the pandemic were more than offset by increases in the fair value of our equity portfolio over the last three quarters of 2020. As I mentioned in previous calls, given our long term focus, variability in the timing of investment gains and losses This is to be expected, and we may continue to see volatility in the equity markets due in part to economic uncertainty caused by the pandemic. With regards to net investment income, we reported $372,000,000 in 2020 compared to $452,000,000 last year. The decline is largely due to lower short term interest rates as well as lower holdings and lower yields on fixed maturity securities in 2020. Net unrealized investment gains increased $353,000,000 net of taxes during 2020, reflecting an increase in the fair value of our fixed maturity portfolio resulting from declines in interest rates. Now I'll cover the results of our Markel Ventures segment. Revenues from Markel Ventures increased to $2,800,000,000 for 2020 compared to $2,100,000,000 last year. This increase reflects the contribution of revenues from our recent acquisition of Lansing Building Products, which we completed in late April and VSC Fire and Security, which closed during the Q4 of 2019. Excluding the contributions of Lansing and VSC, operating revenues within our Marketo Ventures operations Decreased compared to 2019 as a result of lower sales volumes attributed to the economic and social disruption caused by the pandemic. EBITDA for Markel Ventures was $367,000,000 for 2020 compared to $264,000,000 a year ago, reflecting the contributions of Lansing and DSC as well as growth and improved operating results at certain of our businesses. Looking at our consolidated results for the year, our effective tax rate for 2020 was 17% compared to 21% in 2019. The lower effective tax rate in 2020 is primarily attributable to a tax benefit that was recognized in 2020 for accumulated losses on certain investments we sold. We reported net income to common shareholders of $798,000,000 for 2020 compared to net income to common shareholders of $1,800,000,000 a year ago. Comprehensive income to shareholders for 2020 was $1,200,000,000 compared to $2,100,000,000 a year ago. Finally, I'll make a few comments on cash flows, capital and our balance sheet. Net cash provided by operating activities was $1,700,000,000 for 2020 compared to $1,300,000,000 for 2019. Operating cash flows for 2020 reflected higher premium collections As we've seen strong growth in our insurance segment over the past several quarters as well as greater cash flows from Markel Ventures given increased earnings. Invested assets of the holding company were $4,100,000,000 at the end of December compared to $4,000,000,000 at the end of 2019. The increase in holding company invested assets was due in part to the proceeds from our May preferred shares offering, offset by funds used to acquire Lansing earlier in the year. Total shareholders' equity stood at $12,800,000,000 at the end of December compared to $11,100,000,000 at the end of 2019. We ended the year with a very strong balance sheet. We are well positioned to be opportunistic around deploying capital, including to support growth our insurance operations given the attractive opportunities we are seeing in the specialty insurance marketplace. With that, I'll turn it over to Richie to talk more about our insurance businesses. Thank you, Jeremy, and good morning, everyone. As Tom and Jeremy have said, we finished 2020 strong, posting an overall underwriting profit with a 98% combined ratio for the year. While this is not the result we were aiming for as we Enter 2020 after recording $360,000,000 of underwriting losses related to the COVID-nineteen pandemic, Followed by natural catastrophe events in the 3rd Q4, adding an additional $169,000,000 in underwriting losses. This is an amazing accomplishment. We finished the year with a 4th quarter in which we reported a combined ratio of 85% before the effects of COVID and natural catastrophe losses. We achieved strong growth and meaningful rate increases across most of our insurance and reinsurance product lines And saw reductions in our attritional loss ratios across most of our products in the last half of twenty twenty as the impact of price increases portfolio management efforts started to materialize. We continue to seek out opportunities to grow and benefit from the positive insurance and reinsurance market environment and to reduce volatility in our underwriting results as we enter 2021. So now I'll discuss our insurance operations, which include our underwriting operations, State National Program Services operations Insurance Linked Securities Operations. So starting with the Insurance segment, gross written premiums for 2020 were up $709,000,000 or 13%, and net earned premiums were up $544,000,000 also 13%. Gross written premiums were up 15% in the 4th quarter. Premium growth for both the quarter year was driven by continued strong organic new business growth, along with the impact from rate increases across several product lines, most notably in our professional liability, General Liability, Marine and Energy and Personal Line Products. Importantly, virtually all of our growth was in our preferred product offerings As our top line growth was impacted in part by targeted reductions on products and accounts that weren't meeting our profitability goals. We believe our efforts around portfolio construction will continue to improve profitability levels over time. The combined ratio for the Insurance segment in 2020 was 96 versus 93 last year. The 3 point increase was driven by losses recognized in 2020 from the COVID-nineteen pandemic, along with several midsized cabinets that impacted the current year combined ratio by 6 and 3 points, respectively. The impact from COVID and cat events were partially offset by a 3 point improvement in our attritional loss ratio, arriving from several product lines, most notably in our property, Professional liability, marine and energy product lines due to reduced loss experience, rate increases and changes in business mix. We also benefited in the current year from a lower expense ratio, driven primarily by the continued growth in net earned premiums as we've sought to keep controllable expenses flat. Turning to the Reinsurance segment. Gross written premiums for 20 20 were up The year was driven by growth in our general liability and professional liability lines, partially offset by lower premiums in our credit and surety line. The combined ratio for the Reinsurance segment was 104 in both 2020 2019. The 2020 combined ratio was impacted by 7 points of underwriting losses from COVID-nineteen and 5 points from natural catastrophe events Versus a 10 point impact from nat cat events in 2019. Excluding the losses from COVID and cat events, Combined ratio decreased due to a lower attritional loss ratio across several product lines, partially offset by less favorable development on prior year losses. 2020 represented the 4th consecutive year of underwriting losses in our Reinsurance segment, Primarily as a result of unprecedented and significant catastrophe activity over the last 4 years, along with the impact from COVID-nineteen in 2020. While there are certainly opportunities in the current market to grow our top line in reinsurance, we're going to be very cautious about growth in the near term Until we are convinced profitability issues have been resolved by a combination of price increases and portfolio management. To illustrate the difference in our strategies in insurance versus reinsurance, over the past 3 years, Our insurance gross written premiums have grown at a 13% compound average growth rate versus essentially no growth in reinsurance. Recent results have not been good enough in our reinsurance portfolio and we've not earned our targeted return on capital. We recognize that reinsurance is a volatile business and volatility is what we are paid to assume as a reinsurer. We'll continue to make adjustments to our core casualty and specialty products and believe we are on track to produce appropriate returns on a smaller, More focused reinsurance portfolio. So next, I'll go to program services. Gross written premium volume for our State National Program Services operations were down 10% to $2,100,000,000 for the year, driven by the cessation of 2 large programs earlier in 2020. This was partially offset by new program business added in 2020. As a reminder, almost all of these gross written premiums are ceded to 3rd parties. Program Services business continues to perform Extremely well, producing consistently strong operating margins. We are also encouraged by new business development opportunities, And it is clear that there is rising demand for fronting services to help match insurance risk to capital. Moving to our ILS operations. Our combined ILS operations have a little under $11,000,000,000 in net assets under management at 31, 2020. Revenues from our ILS operations decreased 6% for the year due primarily to the continued orderly wind down of CATCo, which continues to return investor capital as quickly as possible. Before considering amortization expense, the operating loss from our ILS operations in 2020 was wholly attributable to cost to CATCo, the majority of which are non recurring in nature. For 2021, Nephila has received in excess of 1,000,000,000 of new subscriptions to date. This is driven by proven market conditions and in part by opportunities created with the transfer of our Markel Global REIT Property Cap Portfolio to Nephila. A portion of this capital was deployed at oneone and additional amounts will be deployed at major renewal dates over the course of the year. Nephila was also able to establish and are working on New investment vehicles. These include an ESG Impact Fund and a Lloyd's Syndicate Multi Class Fund. That being said, Nephila was impacted by the elevated level of U. S. Nat cat activity in the 3rd and 4th quarters, which impacted their fund performance for the year. When allowing for cap losses, development classes or side pockets, Anticipated redemption activity and the timing of capital allocation from new subscriptions, the total increase to AUM will be tempered to start the year. Going forward, we feel strongly about the prospects for our ILS operations. I'll finish up with a bit of market commentary and I'm sure there'll be questions afterwards. Trends that we've discussed in past quarters continued in the Q4 and at the January 1 renewals. We see continuing price momentum in almost all lines. Our insurance rate increases continue to average in low double digits and double digits overall for the 2020 year. Reinsurance, which has lagged primary insurance pricing, closed the gap throughout the year, But we're still not as strong as rates being achieved in the primary market. This situation helps further explain our continued double digit growth in insurance Versus roughly flat in reinsurance. While new entrants and incremental capital raises have had an impact around the edges of the market, We believe that pricing momentum will continue as a multitude of factors such as low interest rates, elevated cat activity, Social inflation, COVID-nineteen losses and economic uncertainty are likely to persist throughout 2021. This hardening market has nothing to do with the shortage of capital. Unlike previous hard markets, capital is actually plentiful. The factors I just mentioned are driving the market and all capital, both new and old, must face that reality as they price business. We also believe our business will continue to benefit as the economy recovers from the impact of COVID-nineteen. While large and midsized business has shown reasonable resiliency to the economic disruptions, Small business, which is a meaningful part of our portfolio, have been adversely impacted. As the vaccine rollouts gain traction, We expect small business activity to rebound given pent up demand in the economy. We enter 2021 well positioned and Excited about our opportunities. We're laser focused on our goal to deliver a 90% combined ratio or lower for the year With double digit top line growth and we're off to a fast start in January and here in early February. Thanks for your time today. And now I'd like to turn it over to Tom. Thank you, Richie. I appreciate it. My comments will be extraordinarily brief this morning. Jeremy's giving you the numbers, so I look forward to your questions. In the ventures area, as Jeremy reported, record year, dollars 2,800,000,000 of revenues, $367,000,000 of EBITDA. And certainly at certain points in the year earlier on, the only two words that I can Used to describe the performance by the Markel Ventures Group of companies are amazed and grateful. They've just done a spectacular job of Figuring out how to operate in the world in which we live and they've produced record results. And as Jeremy alluded to, that's a record level of profitability even without the acquisitions of Lansing and VSC. On the investment side, we first and foremost protected our balance sheet, And we produce positive returns at the same time following our consistent historical disciplined and sustainable approach. The net of all of this, of what's happening in the insurance related businesses, the ventures businesses and the investment operations, All of those factors combined put us in a very strong capital position, which will enable us to play both offense and defense As we enter into 2021, and I suspect we'll have the opportunity to have both teams on the field at various points during the year. So we're very optimistic. We're very grateful for the results that the 18,000 plus employees of Markel produced over the years. I just wanted to thank everybody for the efforts in an extraordinary year that we did not have a playbook for as we entered into it, But we're pleased to report these results to you, and we now look forward to taking your questions. We will now begin the question and answer session. The first question is from Phil Stefano of Deutsche Bank, please go ahead. Yes. Thanks and good morning. I was hoping you could talk the decision to release. Understandably, it's a small portion, but release a small portion of the COVID reserves. And maybe you can help frame for us what you see as the risk around COVID estimates. And I guess I'm just surprised that we're seeing reserves come down already. It feels like industry commentary pretty broadly is that the liability lines will have impact over the next Couple of years and of course the industry always has this mantra of being quick to recognize the bad news and slow to recognize the good news. Hi, Phil. It's Jeremy. Maybe I'll start and Richie might join in. It was a pretty modest reduction and actually we didn't change our gross COVID loss reserve estimates. That is actually a reflection of a little bit of additional benefit from reinsurance. And part of that is associated with Our kind of enterprise aggregate covers that we would have in place, it would have been influenced by the fact that we had elevated levels of nat cat losses. So really the only thing we reflected was a pretty modest amount of additional reinsurance recoveries. We didn't change the gross reserves. So Rich, I don't know if you want to comment on that. Yes, yes, exactly. So it really was all about the aggregate cover and Some of that benefit from the aggregate cover getting allocated to COVID, so gross reserves were unchanged. Totally agree with you in terms of the uncertainty around COVID reserves. I think in terms of The two areas where we have exposure, event cancellation, I think at this point, I think we have a pretty good handle On event cancellation, and I don't expect a whole lot of volatility around that. The business interruption in the UK, again, now that we've got the Supreme Court decision, I think most of the areas are laid out, and it's a matter of moving to final settlement with the insureds. And I think we feel reasonably comfortable about those reserves. But again, this is first time any of us have seen this situation. And then in the U. S, I know there's been a couple of verdicts that have probably been adverse, You would say adverse to the insurance industry. But the reality is the 50, 60 or so verdicts that are out there have been positive for the insurance industry in terms of what constitutes physical damage and upholding virus exclusions, Communicable disease exclusion. So there's still volatility and potential risk out there, but We know we're 9 months later into it, 10 months later into it. We know more about it today than we did when it all started. And I think we feel as good as we can about the reserve. Okay. No, that's an interesting point of clarification on the gross versus the net. In looking at the Reinsurance segment, I guess two questions within that. The first, was there any benefit from a profit Accrual in the Q4 that helped the results. And then, Richard, you framed thinking about The top line growth in reinsurance in your opening remarks, and it feels like so as we get the cat exposed business comes out and goes through Nephila instead. I mean, it feels like this is going to be a clear headwind. Cat exposed business aside, is flattish kind of the right way to think about growth for reinsurance in the short run? Yes, I think flattish is the right way to think about growth in the short run for reinsurance. Obviously, we've transferred roughly 200,000,000 Of catastrophe business over to Nephila. So all things being equal, you would expect gross written premium to be down a bit this year in terms of our casualty, professional and specialty portfolios. The one thing that is happening and could change that a bit is just price increases. We can put the same lines down on Treaties, but end up with more premium because of the price increases. So I don't expect Significant growth, obviously, we've got to over we would have to overcome the $200,000,000 that's coming out. We may not be down the full 200,000,000 We could be something short of that just simply because of price increases on treaties. The first part of your question about profit, I'm not real sure what you're talking about there. I'm sorry, Phil. Yes. Was there a profit accrual that flow through the expense ratio or accrued to the benefit of the Reinsurance segment in some way? I When I was teasing out the quarterly numbers, it felt like there was a slight uptick from what I would have expected. Yes. Phil, the expense ratio, you're right. In the quarter, the expense ratio in reinsurance was up. It is sort of personnel related expenses. Part of that is the cost Associated with our decision to exit out of property within the Markel Global Re division. So much more personnel costs From that than anything on the kind of profit side. Okay. And just one point of clarification. I think there was the 90% combined ratio Was that for all of P&C or just insurance? That's for all of P&C. Got it. Thank you. The next question is from Jeff Schmitt of William Blair. Please go ahead. Hi, good morning. Looking at growth in the insurance segment, obviously, really great rate increases you had said are So we're averaging in the double digits, but I was wondering how much of a drag you may be seeing there from lower exposures, Audit premiums, tightening terms and conditions, if you're lowering limits or increasing deductibles, Are those factors, I mean, is that a couple point drag for the year? Or is that maybe not as high? Yes. There's no doubt that we talked about small business has been impacted obviously a little bit Harder by the pandemic. So some of that business was not there to renew and maybe the new business Stream is not as strong as a result of that. We are definitely in places, shortening our limits And as a way to manage the portfolio, and so you're getting a rate increase, but you might actually have less premium Because of the shortening of the limits, we measure the pure rate increase And so it doesn't include things like changing terms and conditions or shortening up limits. So there is some drag there, but I can't quantify that for you. The reality is, I mean, we're up over double digits in terms of our rate increases, and we're up 13% in growth for the year. So There's a little bit more growth than there is rate increase. So there that suggests to me that net net net, there is some new business On top of just the rate increases that we're receiving. But there's no doubt there is some drag there. And then in addition, We're always remixing the portfolio and there was over $100,000,000 of business that we exited during 2020 Because it wasn't performing to our return to our hurdles. So, our growth was net of having to Get out of some of that business. Okay. And just on that repositioning, which What areas did you get out of? What areas are you looking to kind of shift to? Sure. We got out of a couple of programs that were underperforming. 1 in particular that was probably $70,000,000 or $80,000,000 We came off of that program during the year. Some of our smaller program business, camps as an example, social services, Very little opportunity for growth, challenged areas in terms of profitability we have gotten out of. And where we're really focused is professional liability, casualty, property, marine and energy, where We're growing nicely and our rate increases are not just double digits, they're mid to high 15 to 20 sorts of increases. One other line would be the personal accident contingency in the international space. Got it. That as well. Yes. Got it. Okay. And then just one on the expense ratio in the insurance segment running at 36%. It would have been high 30s the past few years. I know you've mentioned just earned premium volume being up, But IRP premium volume growth has been pretty good for a number of years, I guess. Is 36% the right Run rate to think about there? Yes. We're really continuing to work on the ratio, so great point that we've seen that come down. Our variable component of the ratio really is pretty unchanged. So most of the benefit you see year over year It's us holding the direct and controllable expenses broadly flat, while sort of in insurance growing net earned premium 13%. We think that's a trend that we can continue to see as we grow. So we've been really focused on trying to hold this direct and controllable expenses flat and scaling off our operations That are sort of in place. So we've seen that really measured over a period of time. I mean, you can go back for a number of years And really see the movement in the expense ratio. So we're going to continue to work on that, and I think we can do a bit better than even where it was for 2020. Got it. Okay. Thank you. The next question is From John Fox of Fenimore. Please go ahead. Yes. Hi. Thank you. I have a number of questions. First of all, Very good results. Thank you. Richie, you mentioned event cancellation. I've been doing some reading. Of course, the Summer Olympics were, I guess, technically postponed and there's some thought that if they're canceled this year, that would be a big insurance industry loss. So Could you comment on that point of view and what exposure Markel might have? We did have a portion of the Exposure to the Olympics, we wrote a portion of that. If the Olympics were ultimately canceled, We don't believe it would have much impact to our reserves. We sort of took the position that it very well could be canceled in terms of Setting up our reserves, so we wouldn't expect much change to our reserves if in fact they ended up having to cancel. Okay, great. And in your comments, you talked about the reinsurance business, quote, Wanting an acceptable return. What is that for reinsurance? And what type of capital base is that on with about 900,000,000 I think capital, I'd say, it's about 1 to 1 In terms of the capital. And we need the same $90,000,000 We need the same $90,000,000 combined on the reinsurance. I mean, actually, I'd like to See it be a little bit lower. I said 90 or better in 2021. And Now let me just say, we're coming off some tough performance in the last few years. I don't know that I'll Record put the reserves up at a 90 initially. We will have a margin of safety, but I want to be damn sure It's ultimately going to prove out to a 90, and so that's the goal. And John, it's Jeremy. It should be a little bit more capital efficient too. I mean that was part of the decision to sort Exit property and sort of focus on doing property sort of through Nephila's offering, Obviously, nat cat on the property reinsurance side is a much more capital intensive product line. Right, sure. No, it makes sense. And Richie, did you give an outlook for program services? You mentioned a couple of accounts that didn't renew, But then the Q4 was strong. Do you expect that to grow this year? Yes, I do. I do. One of those accounts was one that They received they were upgraded back to A from A- and so we knew all along eventually that program would go away. We actually were fortunate to keep it longer than we thought. So that was always going to be one that was going to take a little while to replace. The new business pipeline is full right now. We really have seen a pickup in activity. So I think we'll grow in 'twenty one. Okay, great. And then just a kind of a simple question, the clarification on ILS Investment Management. So you have $212,000,000 of revenue and $231,000,000 of expenses for a loss. Does that $231,000,000 does that include the amortization Of goodwill and intangibles? No, the amortization will be separate. Okay. Go ahead. I was just going to say, but it does also include some pretty significant charges related to CATCo. Right. I was just going to ask about that. Have you guys quantified that or not at this time? We did not quantify it. I mean, I think you can go back in the last quarter and probably get a reasonable estimate of it. Yes. What I would say, I think, Richard, you commented on this earlier is full year CATCo expenses were approximately $50,000,000 Pretty significant amount. That would be nonrecurring in nature. Yes, it's very significant. And did you buy any stock back in the quarter? We did not. We stopped the repurchase plan back in March. Okay. Great. Thank you. The next question is from Mark Dwelle of RBC Capital Markets. Please go ahead. Hey, good morning. Just a that haven't already been addressed. Down in the Product Services and Other segment, there was a $41,000,000 charge related to The Latin America Reinsurance segment, is that a goodwill write off or is that an underwriting loss? The description wasn't really clear what was happening there. Yes. Mark, it's Jeremy. Let me try to clarify that. So going back to 2013, when we acquired Alterra, we inherited a Small Latin America reinsurance operation. Really over the course of the past 24 months, we've been winding down our Latin American operations. And this would be an example was talking to before, not really a core product offering and not really sort of meeting profitability and return targets for us. The last remaining Piece of our sort of exit is a sale of a small Brazilian reinsurance company, and we're in sort of active negotiations in that space. And hopefully, we'd have a transaction Later this year, because of the intent to sell from an accounting standpoint, we recognize that loss. What's important to reflect is a little bit of the accounting. So You'll also see in the quarter a pretty large CTA gain in other comprehensive income. And The accounting would require us to crystallize the accumulated CTA loss and reclassify that Into an operating income as an operating loss. So we've got that in the reinsurance segment outside of the combined ratio, that $41,000,000 you alluded to, That's largely offset by a corresponding CTA gain because of that reclassification. The actual book loss is pretty small. Okay. All right. So ultimately, it's primarily an accounting. Was there any material amount of premium associated with that? It sounds like you had pretty well Run it down to a de minimis amount? Over the last couple of years, it was very de minimis. Got it. Okay. The second question that I had, you commented Goal of 9 year better combined ratio, which in my recollection is maybe the first time you've ever set such a goal publicly. So thank you for that. But more specifically, as you contemplate that targeting, would you Steve, most of the improvement from here to be primarily loss ratio driven? Or do you think that there's any meaningful amount of Both. I think there's probably more on the loss ratio side at this point. I made a point of the 85 combined In the Q4, before cats and before COVID, we're hoping there's not another COVID type loss In 2021. And we have significantly reduced our cat exposure by the end of 20 2020. So I would expect our kind of normalized cap load to be less in 2021. So, I feel like we're there in terms of a run rate to produce 90 or below. And then, Jeremy, you know, spoke about the expense ratio. We continue to scale the business, and we're holding the line on our controllable So our goal is to drive it lower than the 36% we reported this year. Got it. Thank you. That's very helpful. Last question, we haven't heard enough from Tom yet, so I'm going to ask you a Ventures question. I mean, Obviously, this year is a difficult year in a number of senses for the multitude of business units in there. What are the key signposts you're looking for as far as reopening to kind of get the revenues, Sure. Well, again, amazed and grateful are the words that I would write for what happened in ventures. When we looked at The economy being shut down in April May and order books that just disappeared, the recovery that has already taken place It's spectacular, and that's a tribute to the management teams that run those businesses and the workforces who just figured out, For instance, the Habsco, which makes the wood flooring for trucks, as the gentleman who runs that said, you can't make wood floors from home. So that workforce figured out a way to operate safely and make wood floors and capture a pretty good amount of business started to show up in the second half of the year. The most economically sensitive section of the Ventures Group Would be things that are related to transportation and the various trailer businesses. And I can tell you those businesses are already picking up and the Q4 was pretty nice and their order books are way, way better than what they were earlier in the year. So I don't think there's much that I can control About general economic conditions, that'd be like thanking the weatherman for a sunny day. But as the weatherman, I would predict that the conditions are getting better. Okay. Thank you. That's helpful. I had no other questions. Thanks. The next question is from Mark Hughes of Truist. Please go ahead. Yes. Thank you. Good morning. I wonder if you could talk about kind of frequency and severity as you saw develop through the year And anything related to COVID and the shutdown? And then maybe social inflation, you mentioned that as the continuing driver for Great momentum. Do you think there's some pent up demand as maybe courts open in 2021? We think frequency is about the same. In terms of severity, that's really where you see the social inflation showing up, the nuclear verdicts, Things of that sort. That's why that's part of the reason we're shortening limits. That's part of the reason you buy reinsurance. We try to do things to manage that. And we do believe the rate increases we're achieving now are Running in excess of trends at this point, and they need to. I've said that we need to be at a 90 Or less to generate appropriate returns on our capital. And so That margin that we've been generating has been needed. So I think frequency, we're seeing about the same So there is where we're seeing it go up. Thank you for that. On the cat exposure, you point out how the normalized Cat load is less than 21. Any other metrics you can share sort of specifics on, say, premiums Related to cat exposure or maximum loss numbers, just to give us a better sense of that change? Probably the best thing I could give you is, each year we sort of work up a cap load in terms of our combined Ratio. And Jeremy, keep me honest here, would that have been about 3 points for 2019 and it's probably less than 2 Excuse me, for 2020, yes, coming in. Probably less than 2 points for 2021. Yes. For example, our Global Re division of that property book, I think ended up writing gross Maybe $220,000,000 certainly less net. I think that's in the press release. But that would be a good example that The vast majority of that business will not be on the books in 2021. And then if I might, just a couple of specific numbers, I'm sorry if I didn't back into this properly. The expense ratio for the insurance segment and then the reinsurance segment for Q4? Yes, sure. The insurance expense ratio was about a 35% and for reinsurance, I think it was about 36%. And the next question is a follow-up from Phil Stefano of Deutsche Bank. Please go ahead. Yes, thanks. A quick one on the $90,000,000 combined guidance. I got the impression in response to an earlier question The right way to think about the $90,000,000 is a fully developed number, but of course there could be some level of conservatism To the reserving basis and on that, I mean, how should we think about this 90 as a reported versus a fully developed number? 90, I'm thinking in terms of the 90 as reported. So, if we have a margin of We obviously will include a margin of safety in both our insurance and reinsurance operations. With that margin of safety, I could Potentially see us reporting something in excess of the 90 in reinsurance in 2021, and I'm hoping for something less than a 90 And insurance in 2021. Okay, understood. And with the ILS commentary and AUM update, I didn't hear Lodge Pine mentioned in there. I was hoping you can give a quick update on that. Yes. Lodge Pine, in terms of results, LaunchPine had a terrific year in 2020. We talked a lot about small to medium sized events. So it was really frequency in 2020 in terms of the cat losses. None of that really got to the retro portfolios. And So they had a terrific year, mid double digits returns on the portfolio. The place that we've fallen short is in terms of Raising capital, we're a little short in terms of our capital raising, and we're hoping to now with a year's Track record, I know a year isn't a lot, but it is a year's track record. We're hoping that we can get out there and raise some capital here in the Q1 This concludes our question and answer session. I would like to turn the conference back over to Tom Gayner for closing remarks.