Good day, and welcome to ACE Limited Second Quarter 2015 Earnings Conference Call. Today’s call is being recorded. [Operator Instructions] For opening remarks and introductions, I would like to turn the call over to Helen Wilson, Investor Relations.

Thank you and welcome to the ACE Limited June 30, 2015 Second Quarter Earnings Conference Call. Our report today will contain forward-looking statements, including statements relating to company and investment portfolio performance, pricing and business mix, economic and insurance market conditions, including foreign exchange, and completion and integration of acquisitions, all of which are subject to risks and uncertainties. Actual results may differ materially. Please refer to our most recent SEC filings as well as our earnings press release and financial supplement, which are available on our website for more information on factors that could affect these matters. This call is being webcast live and the webcast replay will be available for 1 month. All remarks made during the call are current at the time of the call and will not be updated to reflect subsequent material developments. Now, I would like to introduce our speakers. First, we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Phil Bancroft, our Chief Financial Officer. Then we will take your questions. Also with us to assist with your questions are several members of our management team. Now, it’s my pleasure to turn the call over to Evan.

Good morning. ACE produced excellent second quarter results, with earnings per share essentially flat with prior year. Earnings and revenue growth were strong in spite of foreign exchange and market conditions that are growing more competitive. After-tax operating income for the quarter was $788 million, or $2.40 per share. Our annualized operating return on equity was 11.4%, a good return on shareholder capital. Underwriting results in the quarter were excellent. We produced $478 million of total P&C underwriting income, flat with prior year and up 5.5% on a constant dollar basis. The P&C combined ratio was 87.7% and the P&C current accident year combined ratio, excluding cat losses, was 88.4% versus 88.7% prior year. Cat losses were up relative to prior year by $44 million pre-tax, as a result of increased cat activity around the world. And positive prior period reserve development was up modestly as well. All divisions produced outstanding calendar year and current accident year results in the quarter. This was the first quarter that included the contributions of the Fireman’s Fund U.S. high net worth business, which contributed to both revenue and earnings, including a $15 million non-recurring benefit to operating income. On the other hand, foreign exchange negatively impacted operating income by $29 million. We produced $562 million investment income, up 3% in constant dollars. This is a very good result given the interest rate environment and speaks to our strong cash flow. Book value per share growth was flat in the quarter affected by the impact of a rise in interest rates on our corporate bond portfolio. Frankly, it’s sustainable. I view this as a positive. The mark-to-market hit is simply a question of timing since we are essentially a buy-and-hold bond investor, while higher rates mean greater investment income over time. Phil will have…

Thanks, Evan. Book value per share grew 0.5% for the quarter and 1.4% for the year. Book value growth for the quarter was adversely impacted by rising interest rates, which resulted in realized and unrealized losses in our investment portfolio of $602 million after-tax. These losses were partially offset by favorable foreign currency movements of $103 million after-tax and realized gains of $102 million after-tax related to our variable annuity reinsurance business. Tangible book value per share declined 1.5% for the quarter and increased 0.3% for the year. In addition to net realized and unrealized losses and favorable FX for the quarter, tangible book value per share was negatively impacted by goodwill and intangibles related to the Fireman’s Fund acquisition. Excluding the impact of the acquisition, tangible book value per share increased 0.5% for the quarter and 2.3% for the year. We had strong operating cash flow of $816 million that benefited net investment income. Investment income of $562 million, which was impacted negatively by $11 million of foreign exchange versus prior year, was better than expected due to higher private equity distributions and call activity in our corporate bond portfolio. Our strong cash flow will continue to benefit our estimated quarterly investment income run rate of $550 million even with current new money rates of 2.9% versus our current book yield of 3.6%. The estimated investment income run rate is subject to variability in portfolio rates, call activity, private equity distributions and foreign exchange. Our net loss reserves were up about $100 million for the quarter after adjusting for foreign exchange and the Fireman’s Fund acquisition. The paid to incurred ratio was 94%. In the quarter, we had net positive prior period development of $153 million pre-tax, approximately half from long-tail lines principally from 2010 and prior years. The…

Thank you, Phil. At this point, we would be happy to take your questions.

Thank you. [Operator Instructions] We will go first to Michael Nannizzi with Goldman Sachs.

Evan I just had one question that you guys just came back from meeting with Chubb management for a couple of days, as far as Chubb’s business, I mean obviously, expenses are higher, certainly a different brand presence in personal lines. How do you balance maintaining that brand with talking about expense synergies and looking to optimize on that front? Thanks.

Michael, good question, expense synergies aren’t about in some blind way, simply trying to get every dollar of efficiency in a sterile view out of it. Chubb, as ACE does each have virtues to their model and their franchise as to how they operate. The core of Chubb is an agency franchise and a smaller customer segment, more work intensive, very local. The service model, very high quality, local service in both underwriting and in claims, we are very mindful of all of that. And so when you look at – and when you take that, you can’t also say, well service is simply a mindless word for a shield against inefficiency. There is a tremendous duplication of expenses between the two companies in functions where you don’t need two of everything. And that varies by geography that varies by function that varies by business. And we didn’t use just some arbitrary rule of thumb when we came to our target number of $650 million. It’s a conservative thoughtful estimate. We went function by function, geography by geography. We have done many acquisitions before. And I don’t mind telling you that we actually came up with an even higher number, but being mindful that we are going to balance culture, we are going to balance service and quality and what the franchise is about with a competitive profile of the combined companies that necessarily will operate efficiently. All of that together makes us to how we have arrived at what we think is a thoughtful target.

Great, thanks. And then Phil, I guess one follow-up on just a numbers question, if you look at the expense ratio in North America was a little bit lower in the quarter and then there is some noise in ag. Was there anything unusual in the quarter? And I am guessing I wonder if some of the Fireman’s Fund adjustments went through as a contract expense potentially, maybe some color on that? Thanks.

The – with respect to agriculture, I think Evan said a few quarters ago that we would expect a combined ratio of about 91% and we are close to that. We have changed a little bit the timing of the recognition of our premium as it relates to – I mean of the premium recognition as it relates to the government program, and we have made some additional investments in our non-MPCI P&C agriculture business. So, I would say nothing significant.

Okay, great. And then do you have an underlying ex-Fireman’s Fund adjustment like just so we can kind of square that away for the quarter?

When you say under, you mean….

Yes, so, you have the $49 million, obviously you have the goodwill in there as well, but just to make sure that it seemed like about 130 basis points. Is that how we should...

We gave you an 87.9 ex-cat current accident year combined ratio versus last year of 87.2 with North America P&C, does that – and so that’s eliminating that one-time.

That is, okay.

Does that help you with that?

That’s the answer I needed. Thank you.

We’ll go next to Ryan Tunis with Credit Suisse.

Good morning. Hello.

Let’s move to the next person operator, please.

We will go to Ryan Tunis with Credit Suisse.

Move to the next one operator, please.

Go ahead, Ryan.

Hello.

God ahead, Ryan.

Can you guys hear me?

Yes.

Hey, sorry about that. So, I just wanted to ask on the Chubb International business. I think there is 3 or 4 bill premium there and I was just hoping maybe for some detail on how ACE thinks and maybe able to leverage its own international business and maybe improve the profitability there, because I think it’s been somewhat of an under earner in the past relative at least in their broader personal lines?

Yes. As I am sure you know, a minority percentage of that business is personal lines actually and it’s more commercial lines and specialty on some large account, but quite middle market-oriented. And Chubb is an old – has an old network and has been added for a long time. There will be a lot of efficiency we will gain between the two operations, because they are a duplication. Our plan is to integrate Chubb’s international business into ACE’s. So, we will have only one statutory entity in the geographies and the vast, vast majority of those will be ACE entities. Canada is an exception. We will integrate ACE into Chubb up in Canada. There are many good people in Chubb’s international operations. And so along with that business, there is a marginal cost. You got to be able to service that business and you have got to be able to underwrite it, you got insight into distribution of it. There are a lot of good people who are going to bring a lot of value to ACE’s international operation along with that business. We will, as I said, it’s marginal cost and we will, at the same time, eliminate duplication of cost and function across geographies. In particular what we see and we can see it by specific geographies is there is real opportunity internationally given what they have built in middle-market in particular in certain territories to take advantage of that and add meaningfully to product, add meaningfully to the leverage of some of that talent to helping some other tangential territories that are around the countries, where that talent resides now. I hope that helps you with it.

Yes, that’s helpful, Evan. Thanks. And then I guess my follow-up is just on U.S. personal lines and just trying to understand, obviously ACE and Chubb have different products and how do we think about with the two entities coming together, are we going to see just Chubb’s product or is there a place for both products? And a broader question I guess is what’s been the reaction so far from independent agents in personal lines given two of the biggest high net worth providers announced a combination?

I think around the – you can’t see my colleagues shaking their heads around the room. We are puzzled by the question by the comment with all due respect of different product. They are substantially the same product. We are both covering the needs of a high net worth customer. Each of us may have a slightly different risk appetite depending on the cohort of customer. ACE may have been focused a little more on international. Chubb has capabilities in product that is very old and very deep. And so frankly, we actually see the product integration as very complementary and quite comfortable. For agents and brokers, they want to know that we are going to behave in the similar way. They want to know that we are going to covet Chubb’s claims capability and service, which is simply renowned. And I can guarantee you we are going to do that. And they will be leading those efforts. And so frankly, we think for agents it brings them a superior ultimate offering. Agents want to know that we are going to maintain compensation structures and that by the way, that we are going to keep the agency, the independent agency system as a centerpiece of distribution here to the customers. And we are being loud and clear that that is without a doubt. And so I think in this case, it’s good news for agents and for brokers and for customers. By the way, the two of us on one hand may appear significant in that business. On the other hand, it depends on how you define the business. The cohort of high net worth personal lines potential customers and our own estimation is north of $40 billion and it resides on the books of so many traditional personal lines carriers around the United States. And our objective is to identify those customers and make them aware of our offerings and give them product that’s more appropriate to their needs for many of them than what they have today.

Okay. And from the product standpoint just wanted to confirm that broadly speaking, there is not a big difference in price point of what ACE was offering in Chubb. I guess that’s more of what I was getting at?

Ryan, that really varies. It’s – that varies by state, by company that is writing, by vintage of policyholder. And as you know, there is tier pricing that is employed that allows you to more finely risk rate the business. And I think that’s where a lot of that noise that you might see from the outside arises and – but clear eyed and thoughtful underwriters in portfolio management know how to rationalize that and it’s not as chaotic as you might imagine from the outside at all.

Thanks a lot, Evan.

You are welcome.

Ladies and gentlemen, I apologize for the – we had some technical difficulties. [Operator Instructions] We will go next to Charles Sebaski with BMO Capital Markets.

Charles, can you hear us?

Hello, I can hear you.

Okay, now I can hear you.

Good morning.

Good morning.

I had a question on the growth strategy with you and Chubb and I guess on the product line, I was wondering if you could give, not on the personal, but on the small commercial middle market, which products you really see as being the best position for you to be able to introduce to the Chubb distribution, where do you think the strength that you guys obviously have a very broad product offering on the commercial side. Where do you see the most natural early fits for the growth plan going forward?

Charles, we are on one hand, some of it is a little premature. I am going to give you a general feel. Some of it is a little premature and we also have plenty of competitors who listen to the phone calls and we are hardly going to hand a roadmap to everybody. But you can imagine, Chubb does a great job in traditional middle market products and some specialty products and towards industry verticals that they are such a great deep knowledge of and are great at. On the other hand, imagine the products that ACE sells, everything from environmental liability to farm and ranch to product recall, the construction and we could go on and on with a lot of product that will enhance the offerings to those verticals and also might help to expand into a few others as we go along. That’s middle market, and that is distinct from small commercial, which we have each been have sort of nascent efforts towards that we will endeavor to pursue in a far more meaningful way. And I think that will present substantial opportunity. At the same time, I don’t mind telling you while we have product synergies that we imagined around the world, whether it is cross-selling, which we are not probably in is about cross-selling, whether it is new product or new customer cohort, we also imagined revenue dyssynergy in the early years where we have overlap and duplication, where some agents may or brokers may think over concentration in an area, in the line of business and the customer, etcetera and any of our projections also recognize those. There is puts and calls in the early 2 years or 3 years about – between dysynergies and synergies. Revenue synergies, we imagine will be – will appear in a real way by year 3 and year 4, meaningful year 5 substantial.

Do you guys need to put on more people for the middle market product offering into that independent agency channel, I mean given Chubb’s underwriters have theirs, it doesn’t, you say there is no more people needed to service that model?

Not really. Not from what we – no.

Excellent. Thanks for your answers.

You’re welcome.

We will go next to Sarah DeWitt with JPMorgan.

I wanted to follow up on the Chubb’s acquisitions on the double-digit earnings accretion, what is the net assumption for net revenue synergies and where do you think there could be upside, could there – could you buy less reinsurance, could you put in some internal quarter shares, reduce the tax rate or reinvest the big portfolio?

Sarah we are not going into that detail of specifics of the sources of earnings accretion and how much is coming from revenue and how much is coming from expense. And we are certainly not going into details about reinsurance. That is actually a competitive secret that we don’t – we are not going into.

Okay, fair enough. And then I would be interested in getting your broader thoughts on industry consolidation, what inning do you think we are in, in the consolidation wave and do you think you will see more large primary insurers respond to your Chubb acquisition with big deals?

Well, I have got a pretty full plate and really I am pretty absorbed in all the things around ACE and around Chubb. I don’t know what my competitors are imagining or doing at the moment. I don’t know what inning we are in. I can’t really opine on that. I imagine there will be more acquisition, but I have been reading lately that there will be more large acquisitions because of ACE and Chubb. When I think about it, I am not sure that’s right. I can’t speak with any certainty but first of all, most of my or many of my competitors are very thoughtful and they are good operators and they are good stewards. They attempt to be good stewards of shareholder money. And they have a good sense of strategy for their companies. Anybody who thinks that way, first of all is going to look at an acquisition not from a point of size, they are going to look at it at the intrinsic value due to the characteristics of that to be acquired holds. And whether it is truly value-creating in a transformative way, otherwise you don’t do something large. ACE Chubb is a very unique opportunity and we took advantage of that opportunity. And I believe my Chubb colleagues who know that who are aware of the insights behind it, feel the same way about that opportunity. And so when others are thinking about transformative, well they have got to imagine, it’s not simply about size, what does it bring to you. And there are too many obvious combinations when you think that way.

Okay, great. Thanks for the answer.

You’re welcome.

We will go next to Kai Pan with Morgan Stanley.

Good morning. Thank you. First question Evan, you commented on the pricing detail. Thank you so much for the details. But the pricing looks like more competitive, especially on large accounts, property and wholesale. Some of your industry peers opine that the market is now is more disciplined in terms of better data analytics and this still low interest rate environment. So, just wonder what’s your take on that and do you believe the pricing competitive enough, the pricing will get any worse from here and what that to do with your underwriting margin going forward?

Kai, first of all, yes I think that pricing is going to become more competitive from here. And I think, ultimately listen that gets reflected in margins and there is no two ways about that. I described to you and have many times the levers we have to pull in ameliorating that margin impact, 40% of our business is probably not subject to cycle nearly the same way. And we have a lot of portfolio management and underwriting discipline insight and product mix and territory mix that allows us to ameliorate, but you don’t eliminate that and it will have an impact on margins in due course on one hand. Number two, I think the question about cycle management and data and all of that, I think you can’t paint it with a broad brush. And I think those who do are simply, they are overly simplistic in either how they think or certainly in how they describe certain areas of the business where you have broad distribution reach to get the customer, where you have more homogeneous pools of risk, lower severity-related, higher frequency-related, I think that is where there is a bit more discipline at least at this time. So, you would say more smaller commercial, more middle-market commercial, I think that is less subject though hardly immune on one hand. I think as you get up to upper middle-market, larger risk, I think you have a lot of players with a lot less data. People are buying much bigger limits, so you have a lot piling on to the same risk who just have capital and an underwriter and a dog and are chasing some volume. And there I don’t see that same sort of well. The insights of analytics will ameliorate a market cycle.

Thank you so much.

Everybody wants to put everything into one neat sentence and how the market works on a bumper sticker. And you know what? It’s a lot bigger, it’s a lot farer ranging and it’s a lot more dynamic and open and market and free market-oriented and messy therefore than you can fit on – in 10 easy-to-say words.

That’s great. Second question is switching to Banco Itaú’s P&C business, just wonder what’s the progress of the integration over there in related to the – in particular, the economy in Brazil as well as any potential claims from the Petrobras investigation?

In a word, that’s going very well. It’s – and I am going to let John Keogh indulge on that.

Sure. Yes. I will pick up – first integration piece of it is currently on our plan and our trajectory to bring it to organizations together by end of the year. We have received regulatory approval to do that as especially economy and Petrobras, it’s – you all read the same thing and understand that, that investigation is widespread and growing. We are obviously keeping a very close on it as it develops and mindful of the implications of it. But having said that as we look at the current state of all we know, there is nothing we have seen in terms of claims to our business in Brazil right now that is significant or material. Now, certainly the economy is in bad shape. Nothing we are imagining in the near-term that suggests it will get better. Any implications for that right now in terms of the competitive market in Brazil is possible? It’s one of the more difficult markets right now that we are operating in. And we have got good operators in the ground and understand that through a market like this before from doing a conduit like this before in Brazil and we continue to perform well there.

What we can tell you is that the Itaú ACE franchise is a very powerful franchise in the commercial P&C business in Brazil with deep relationships. And they have done a very good job of maintaining the portfolio. And at the same time, they are very good underwriters and boy they do know how to use reinsurance. There is a very hungry market down there and yet our operation because of relationships has a lot of influence and controls a lot of customer on access. So, in many cases, the road to your share of that business comes through us.

Thank you. Lastly, just quick number question, on the Fireman’s Funds that you mentioned like a $50 million non-recurring of the component of that, the $49 million benefit is non-recurring, but the $29 million amortization. Would that be recurring?

Those components recur, but the net of the two is very small for the remainder of the year.

But is that the $29 million going to like going forward lasting for several years or not?

No, it would just be for the remainder of this year.

Okay, great. Well, thank you so much.

But you heard him, Kai, that net $15 million we had diminishes significantly as you go to the rest of the year.

Thank you.

We will take our next question from Brian Meredith with UBS.

Yes, good morning. A couple of questions here for you. First, Evan, we have talked about pricing, I wonder if you could give us an update on kind of what’s happening with loss trend right now, maybe domestically in the U.S. and internationally commercial and personal?

Yes. The – I will ask Sean to opine a little bit on it, but it isn’t any different than we saw last quarter or the quarter before. It’s quite steady. And loss cost is running higher than pricing.

That’s right. We are not seeing any material changes in claims frequency in the quarter or year-to-date, Brian, trends generally in line with our implementations for the current accident year. On workers’ comp as a reminder that’s risk management ground up, loss frequency is slightly lower in our casualty and professional lines we mentioned before, we see frequency changes up and down, but that’s in line with the portfolio management and underwriting actions that Evan mentioned nothing systemic or broad-based that we are seeing there.

Great, thanks. And then second question here, Evan, it’s a combined company, Chubb ACE is going to generate a ton of cash flow. And if I look at Chubb and ACE’s capital management strategies, they were kind of different strategies. I am just wondering once you guys have reached your kind of desired leverage with respect to debt to cap, do you see kind of the ACE strategy kind of evolving any more closer to kind of what the Chubb strategy was or do you think it will be roughly similar?

Well, I think it will evolve. I think it’s – I don’t see it as sort of the Chubb strategy, which was fundamentally to return all the capital you generate and maybe not have the same level of investment for growth that ACE has had. And our appetite to invest for thoughtful growth will not go away. We keep a – we keep faith that we have a franchise to build and we will continue to build and we will continue to invest in that and that’s organic fundamentally. Remember, two-thirds of ACE’s growth came organically prior to Chubb and one-third through acquisition. We will maintain, as Chubb has some level of prudence of capital for flexibility, for opportunity and for risk. And beyond that, I think as you said, you are going to generate a substantial amount of cash flow. And we had already been returning capital to shareholders excess of what we thought we required for the things I just enumerated. And we will continue on that track. And I think the numbers will just be larger, because the total is going to be significantly larger.

I think it’s very helpful.

What did you want to say?

I was just going to say I think as we have talked about it, it will be a smaller percentage. It might be a larger number in terms of the total quantum, but a smaller number relative to the total amortization, right, total capital.

Yes, sure. Does that help you, Brian?

Yes, I think that’s helpful. So, you are into smaller number you are meaning versus what Chubb was doing historically?

Not dollar number, he was saying percentage of the balance sheet. That’s all.

Got it. Helpful. Thank you very much.

You are welcome.

We will go next to Jay Gelb with Barclays.

Thank you. I have two unrelated questions. The first was with regard to the global property/casualty growth profile for the rest of 2015. I believe the term we use was revenue growth. Is that consistent with earned premium growth?

Written premium growth.

Written, okay, thank you. And then the second question, Evan, is with ACE buying Chubb and Chubb – I am sorry and the combined company assuming the Chubb brand in the marketplace, does that also mean that from a corporate perspective the Chubb name will be adopted, including things like the stock symbol?

Including things like what?

The stock symbol.

The stock symbol? Yes, sir.

Okay. So the combined company going forward will be Chubb Corp?

Well, we haven’t said Corp., but it will be Chubb. It will be Chubb something. It might be Chubb Limited at the parent. We have ACE Group Holdings as intermediate holding company. It may be Chubb Group Holdings. We haven’t really come to that part exactly, but you get kind of thinking about it, but the symbol will be Chubb. And we will start at the top and we will be unequivocal.

Thanks for clarifying.

We are all in Jay.

We will go next to Meyer Shields with KBW.

Thanks. Good morning. A couple of small ball questions. One is there any guidance on the ramp-up of Fireman’s Fund related DAC amortization?

When we say ramp up, do you mean – so we have said that the DAC amortization that did not occur in the first quarter was about $50 million. And that was offset to some extent by the amortization of the intangible gets established at that point. And what I said just a little bit earlier was as you go into the out quarters of this year those two numbers are also almost equivalent and will have very little bottom line impact of the two.

Right. But we should be reverting in a few changes we get in the year?

That’s $50 million, it will be more than $50 million in the year, it was $50 million in the first quarter. There will be some amounts in each of the subsequent quarters, almost directly offset by the amortization of the intangible in those later quarters. As the new business emerges, we will be establishing DAC on that and then it will reestablish itself just like a normal line of business.

Alright. Okay, perfect. And also there was a bit of a ramp up or I am sorry, bit of a year-over-year increase in DAC in overseas general and reinsurance, is there something we could talk about what’s going on?

How about we take that one offline with you?

Are you talking about the DAC amortization of those two?

Yes. The policy acquisition cost ratio.

Okay. I will take that offline.

Okay, thanks.

We will go next to Larry Greenberg with Janney.

Hi, good morning. I am sorry to beat the dead horse on the Fireman’s Fund, I just want to be sure I understand, so the – on the underwriting side of it, the full impact was the DAC, that would have flowed in the expense ratio and that would have been the only ratio other than the combined, obviously that would have been impacted am I thinking about that right?

Yes. It will be a reduction. We didn’t have the DAC amortization, so it would have been reduction to acquisition costs. And at the same time, it’s an increase to the other income for the amortization of the intangible.

But Larry, you said something that actually we should correct, that’s not the full underwriting impact of the Fireman’s Fund in the quarter, that’s the one-time. There was a modest amount of ongoing and we haven’t disclosed that amount. We don’t do that.

Right, got it. Thank you. And then Evan just a general question on the deal, obviously there is going to be a lot of accounting noise related to the transaction. And from our standpoint, it’s going to be challenging to really track the true economic returns that you will be generating. And I have always viewed you as being very focused on tangible book value and growing tangible book value. And you have been very clear on how much you believe in this transaction and the merits of the transaction and I think we could probably put together your willingness to accept the tangible book value dilution in the deal. But I guess my question is just how difficult was it for you to get over the dilution hurdle, just maybe if you could share some thoughts on that?

Yes. Actually, that’s a really good question and because frankly you hit at the – maybe the nut of it for me. I had looked at this before over the years. And the tangible book value dilution stopped me in my tracks each time. I was unwilling to accept it. In June, I had a lot of time on my hands idle sitting because I broke my leg. And I would like to sit and think when I usually, pretty active guy. And actually, I spend a lot of time thinking about that. And what I realized, I came to is in my own mind, everybody sees their own judgment. In my own judgment, I was thinking incorrectly about this that actually it wasn’t the question of the dilution, it was the question really of how long does it take you to get back to where you were and how much faster, therefore will tangible book value grow. And will the value creation take place from there. And by the way, that then will tie me back into book value and ROE, which I want to speak about for a minute. And what I came to in my own mind was that if the dilution, if you could come back to where you actually are right now in 3 years, then that’s a period of time of enough certainty to make to get beyond three, you are a little more aspirational, you are less certain. But all else being equal, that is all the assumptions are reasonably conservative and I believe in them of how you get back to that number. Then given the value creation that goes on for many years to come and all that you are getting from it that was a price willing – I am…

That’s great. Thank you very much.

You’re welcome.

We will go next to Ian Gutterman with Balyasny.

Thanks. Good morning, Evan. I wanted to address and Larry just stole my thunder a little bit, but I wanted to address sort of the two objections I hear from people who are less optimistic about this deal from investors and analysts and why don’t we just continue the tangible book theme because that’s when it comes up a lot. I agree with most of what you said. I guess I would add even further I don’t understood why tangible book value is a good way to look at your company. And I guess the reason I would say that is because you could have paid $80 for Chubb and you still would have sort of had intangibles, goodwill sort of a few billion dollars. And in that case, I think no one would say that is bad will, if you will, right? And so why should we assume any dollar paid above book value for Chubb is bad, right? Is it the real way to look at that is reported book value, because if you overpaid, you will have a low ROE and reported book value going forward. If you underpaid, you would have a higher ROE and reported book value going forward. So, why is tangible book value even a relevant metric for you guys in that banks where it regulates your capital? I think reported book is the better metric.

You know what, pick your poison. I think they are both good metrics. I agree with you that you are just coming around. I think what you are saying to me is the same thing that goodwill is an income-producing asset and it’s a very high quality. And I think that really gets to be the question. Is it of low quality? Will it ultimately be impaired? Is it – and it’s all that, that it represents and I agree with that. I also agree that when you are looking at the economics of these, you got to look through a bit the accounting and the intangible amortization to see the true wealth economic, wealth creation that is taking place. On the other side of the coin, as an operator, I will say that tangible is your most constraining factor. Everything comes off of tangible and all leverage, your most constraining is tangible. And we are a balance sheet business and you can only pay claims out of tangible capital. And by the way, regulatory and rating agency is about tangible capital. That’s your ticket to operate and to grow and flexibility. And so you can’t ignore tangible, but I recognize how you are thinking, which is simply from a financial perspective and industrial perspective rather than an operating perspective if you got to think both. So, I don’t disagree with you, but I think you need to be balanced here, Ian. And also, I think where people are coming from about the tangible, it’s – if you could say I am growing at mid-teens, it’s telling you that, that goodwill, which is so much bigger on the balance sheet, that is a – it is a levered asset that is income producing and that’s what you have to square the circle against those who then talk about ROE, but it’s then again as I said versus a book value that grows more quickly.

Agreed. And then the other one I have heard bunches, very few people seem to want to give credit for future revenue synergies just because historically for most companies that tends not to materialize as much as cost synergies, but the way I hear you talk about it and even in the slides in the release suggesting that the revenue synergies could be in the same ballpark as the cost synergies by year five. Can you maybe just talk a little bit more about how confident you are in achieving that year five number? And what the risk are, because I think people are kind of being a little too dismissive of that.

Yes. Listen, I understand the cynicism around it. And frankly, when I look at these things, often I am very cynical about them. The notion of well, we will just cross-sell a lot is frankly I think it’s generally wishful thinking. It doesn’t happen the same way. When we talk about introducing more product to begin with by the way, it’s not simply that we are going to cross-sell to the existing customer who bought three, they are now going to buy four. No, I don’t see it that way. I see that here is the substantial distribution with a brand name that we will have access to and those agents and brokers that we don’t have big relationship with, they have dose cohorts of risk on their books now. They have those customers now. And as Chubb is able to introduce more products, we will write more business from those agents that I feel confident about. Number two, I do think there is a certain amount of cross-sell. And I think it’s because the products are offered more in a menu of – in either a menu or a package and I think we can broaden that up. I think they are buying. It’s not a nice to have. They are buying it now from someone else and Chubb will be able to offer that. Number three, I think the markets we are going to drop down into in customer segment or go up to and broaden our product offering in the middle-market, upper middle-market in USA, I think is extremely real. I think the problem is when you talk about this, you are not going to do it out-of-the-box year one when you are integrating and you are setting things up. I think you have to be willing to give it an amount of time. The first three years is really about the expense synergies we are going to recognize, but I can tell you as we all sat down last week even to talk about what the future could look like, where our minds were, our Chubb colleagues were – their minds were in the same place. And they recognize the same opportunities and we are both silver operators. We are all about execution, recognizing that strategy is only 10%. The rest is about executing. And we all pride ourselves on execution and we are all pretty conservative. And so are we all wrong? I don’t think so. I don’t think so at all. So, I actually do think one plus one together is going to equal much more than the two separately. And by the way without being dismissive, disrespectful, anything, I believe that Chubb, a great company has underinvested in the last number of years. And that growth, a portion of that growth comes from sort of correcting for that.

Got it. So, bottom line, you….

This will be a religious discussion, Ian. It’s a faith until you see it and….

Right, right. But you don’t view that as a stretch goal if I ask you in 2020, did you get several billion of incremental premium? That’s not a stretch goal that’s something you think is readily twofold?

I do. We didn’t put stretch goals in this. We pitched it up the middle.

Perfect. Alright, thank you.

You are welcome.

Operator, we have time for just one last question to ask questions please.

Our final question – we will go to our final question from Jay Cohen with Bank of America Merrill Lynch.

Most of my questions were answered. Just one maybe for Phil, so can give us some range of premium contribution from Fireman’s Fund for the next several quarters just for modeling purposes?

What I can tell you is that in the quarter, so the non-recurring – I mean, the recurring business in the quarter was a premium level in the neighborhood of $120 million.

Very helpful.

Jay, that’s going to spur questions from people of, wow, something happened, where is the Fireman’s Fund volume? We are not going to go into this, except what we are going to say is, we, as part of this transaction, we purchased reinsurance, quota share reinsurance. And so that will square the circle for those who will say the recurring volume appears low to us. Nothing happened. There is not some problem or any of that, okay.

Got it.

But we are not going to go into detail, of course, about the reinsurance.

Now, fair enough. This is helpful. I appreciate that.

You are welcome.

Okay, thank you everyone for your time and attention this morning. We look forward to speaking with you again at the end of next quarter. Thank you and good day.

And that concludes today’s conference. Thank you for your participation.