Good day everyone, and welcome to the First Quarter 2017 Earnings Call of Everest Re Group. Today's conference is being recorded. At this time for opening remarks and introductions, I will turn the conference over to Ms. Beth Farrell, Vice President of Investor Relations. Beth, please go ahead.

Thank you, Debbie. Good morning and welcome to Everest Re Group's first quarter 2017 earnings conference call. On the call with me today are Dom Addesso, the company's President and Chief Executive Officer; Craig Howie, our Chief Financial Officer; John Doucette, our President and CEO of Reinsurance Operations; and Jon Zaffino, our President of North American Insurance Operations. Before we begin, I will preface our comments by noting that our SEC filings include extensive disclosures with respect to forward-looking statements. In that regard, I note that statements made during today's call, which are forward-looking in nature, such as statements about projections, estimates, expectations and the like are subject to various risks. As you know, actual results could differ materially from current projections or expectations. Our SEC filings have a full listing of the risks that investors should consider in connection with such statements. Now, let me turn the call over to Dom.

Thanks, Beth. Good morning to all, and welcome to our first quarter earnings call, and we have a positive report for you today. Before we dive into the quarterly results, I would like to touch briefly on the characteristics that have helped the Everest Re Group deliver above average returns. Certainly our size and scope are important differentiators, but more critical to our success is the entrepreneurial and decisive culture that permeates our organization. We are not satisfied with the status quo, but instead, continually seek to expand our horizons for new opportunities as well as increase our penetration to existing clients. Examples of this would be our expansion into credit opportunities in both our Reinsurance and Insurance businesses. And just this quarter, we participated on the new National Flood Reinsurance Program which represents new business to the market. As governments seek to privatize certain markets, we could see similar additional opportunity. So why is this important? These new market segments allow us to continue to diversify our portfolio away from the more competitive markets and sustain underwriting profitability. This, and a constant focus on expenses, and our expanding use of capital market tools explains why we continue to outperform the market. This now leads me to our discussion on results, which again were quite positive for the quarter. Operating income increased 17% in the quarter to $260 million, giving rise to $6.29 in earnings per share, and a 13% operating ROE for the quarter. The increase in earnings is a result of an increase in both the underwriting and investment income. Furthermore, the underwriting result improved in both the Reinsurance and Insurance division. While our reinsurance combined ratio was up slightly over the prior year, due to a relatively minor increase in cash, the increase in earned premium propelled…

Thank you, Dom, and good morning everyone. Everest had another solid quarter of earnings, with net income of $292 million for the first quarter of 2017. This compares to net income of $172 million for the first quarter of 2016. The 2017 result represents an annualized net income return on equity of over 14%. Net income included $32 million of net after-tax realized capital gains compared to $51 million of capital losses in the first quarter of last year. 2017 capital gains were primarily attributable to fair value adjustments on the equity portfolio. After-tax operating income for the first quarter was $260 million compared to $223 million in 2016. The overall underlying gain for the group was $183 million for the quarter compared to an underwriting gain of $171 million in the same period last year all segments reported underwriting gains for the quarter. In the first quarter of 2017, Everest saw $20 million of current year catastrophe losses related to Cyclone Debbie in Australia compared to $10 million of catastrophe losses during the first quarter of 2016. The overall current year attritional combined ratio was 84.5% down from 85.3% in the first quarter of 2016 primarily due to a lower commission ratio in 2017. Our overall expense ratio of 5.8% was down slightly from the first quarter of 2016. Our reported combined ratio of 86% was flat compared to the first quarter last year. For investments, pre-tax investment income was $122 million for the quarter on our $18 billion investment portfolio. Investment income was 19% above last year; this result was primarily driven by an increase of limited partnership income which was up $17 million from the first quarter of 2016 primarily due to the turnaround in energy related investments compared to last year. Pre-tax year on the overall…

Thank you, Craig. Good morning. We are pleased to report another strong quarter with a $178 million of reinsurance underwriting profit. Our earnings reflect the continued strength of our reinsurance franchise the stain by product and geographic diversification, underwriting discipline and ultimately relevance to our client. Everest long standing global presence high ratings and nimble execution underpin our outperformance through this part of the underwriting cycle. Before discussing renewals, here's some color on the first quarter results. Total gross written premium for the first quarter was $1.2 billion an increase of 19% compared to Q1, 2016. There were a combination of growth on existing business and new business opportunities. This included $53 million of crop premium on the new quarter share arrangement done in conjunction with the sale of Heartland as well as new structured reinsurance business. The growth in these profitable, diversifying, and strategic line, fortifies our competitive strength in an otherwise difficult market. Additionally, these customized transactions require a differentiating breath and skill from a sizeable and strong partner. Our agility in executing these bespoke transactions is highly valued by our clients, and accomplished to attracting best-in-class underwriting actuarial and analytical talent and providing them appropriate resources within a lean and responsive organization conducive to creative solution. The Q1 loss ratio increased from 55.6% to 53.2% in Q1 2016, driven in part by an increase in the cat loss ratio with losses in Cyclone Debbie impacting the quarter. In addition, the quarter experienced lower favorable prior year loss development and an uptick in the current year attritional loss ratio. The shift in the composition of our book to the higher expected loss ratio on a new crop business accounted for the slight increase in our attritional loss ratio. In our U.S. reinsurance segment, Q1 2017 gross written premium…

Thank you, John, and good morning. The Everest Global Insurance operations performed well and in line with our expectations in the first quarter. Many strategic actions we have taken will establish a world-class specialty diversified insurance organization by becoming increasing evident in our results; they consistently expand in top line across a balance portfolio, a testament to the relevant we are achieving among our insurance and brokers. We continue applying opportunities to profitably expand our business across our global platform despite a challenging market environment. As a result, Everest Insurance is firmly positioned in the market landscape as a specialty provider offering a live breadth of product solutions in lines of business that we expect to outperform over the long-term. As in prior quarters, due to the divestiture of Heartland in late third quarter of 2016, I will be discussing our comparative results, excluding this business. For the first quarter of 2017, the Global Insurance operations registered $434 million in gross written premium, an increase of $75 million or 21% over first quarter of 2016. Another outstanding result and consistent with the growth rate we saw in 4Q 2016; this represents the ninth consecutive quarter of growth for our Global Insurance Operation, each division within the North American segment contributed to this with notable strong performances from our Canadian and accident and health platforms. Each of which grew in excess of 30%. A further note, roughly 18% of our production in the quarter was derived from our recent new business launches and from our Lloyd's operation, which as you will recall has entered only second year of account. We remain encouraged by this balanced contribution across the diversity of our growing underwriting platform. Net written premiums for the quarter were $346 million, an increase of $37 million or 12% over…

Thank you, Jon. That ends our prepared remarks. I'd like to open up for the Q&A session.

Thank you. [Operator Instructions] We'll take our first question today from Elyse Greenspan with Wells Fargo.

Hi, good morning. My first question, I was hoping just to get a little bit more color. You guys saw exceptional growth in your reinsurance business to start the year. I know lots of moving parts with the crop, some growth in credit, and then also in other geographies outside of the U.S., but when you kind of blend your market outlook together, how do you really see the growth trajectory over the remaining three quarters. And just a question in relation to the Q1, is any of the premium growth that you saw kind of one-time in nature or are there any multi-year covers included within the strong growth you saw in the first quarter?

Good morning, Elyse. It's John, and thanks for the question. So, I think there were some one-off parts to the growth in the reinsurance operation. As we mentioned, there were some true ups, but there is also a combination of growth in the mortgage and credit lines. Some of those are new deals, and some of those are multi-year deals where we're continuing to get premium from prior quarters. So we would think a normalized growth rate would be high single-digit.

And do you think that high single-digit is something that's sustainable over the balance of 2017 based on how you see the market right now?

We do. We do think that -- I mean, there's a lot of gives and takes in that, but we continue to see new opportunities. There's places where we're coming off business that we don't think is attractive, but at the same time we continue to find new opportunities, both -- we talked about the motor quota shares in Europe tied to Solvency II. Also, in the U.K. motor market there's opportunities. But then also in the mortgage and the credit and one-off structured deals that we have in the pipeline now.

And this is Dom. I mean, it's also highly dependant upon June 1. So while we have had lots of new opportunities and growth in new areas, new types of products that we're offering, in particular credit, but depending on what happens with rates is just one; it's still yet to be determined. So hard to predict some sustainability to our growth rate, and we don't yet know what June 1 will be offering us.

Okay, great. You guys [indiscernible] loss, did you guys have any adverse development associated with the change in the rate there?

The [indiscernible] loss, the prior period event, and that was covered in our prior year-end reserve position. And it's a kind of thing that though not specifically known at prior years, the kind of thing our reserve analysis contemplates for things that can go wrong. So it's completely covered in that reserve position. We estimate that with the current discount rate that they're applying up to $30 million was the impact.

And that's included in how your reserves are set today?

Yes, absolutely.

Okay. And then in terms of capital return, there was no share repurchase in the quarter. I know we also saw a slowdown at the end of 2016. When you guys are thinking through capital return right now, how do you kind of balance just the growth opportunities that you're seeing in reinsurance as well as insurance? And then just also where your staff is obviously trading at a higher valuation, so can you just update us on your thought process for the first quarter, as well as when you think about capital return over the balance of 2017.

Sometimes I feel like a broken record on this one. As you know, we do not give any predictions as to what we will be doing in terms of share repurchases. But relative to the first quarter how we were thinking about it was that, as you did see, we had significant growth. So we remained a little bit more cautious on capital return, to the point of not buying in any shares. This coupled with the fact that we had a number of cat events that were potentially swirling out, surround [ph] out there. So that was part of our deliberations. And then the third, I think that you made reference to of course, was our rise in stock price. While in and of itself and by itself not a sole determinant, but along with the other factors led us to not be purchasing any shares back in the first question. And none of that means that we won't be back into the market throughout the year. But again, it has to be balanced up against events are the occurring in the marketplace as well as our premium growth trajectory.

Okay. Thanks so much, and congrats on a great start to the year.

Thank you, Elyse.

We'll take our next question from Kai Pan with Morgan Stanley.

Thank you and good morning. And so first question on the insurance side. What do you think are your competitive advantages that you can grow in this -- like a more changing market condition, at the same time improving your core or your combined ratio towards your 95%, like maybe long-term target? How soon do you think you can get there?

Good morning, Kai, this is Jon. I think our competitive position in the market is quite strong. And think sits on the backs of we are obviously trading with the benefit of a significant balance sheet from the Everest Group, which credentials exceedingly well in a number of our chosen markets. We have been able to amass what we feel is very distinguished talent, taking advantage of the dislocation in the market over the past couple of years. And remember, our insurance platform has been around for a while, so we have a pretty good reach in terms of different market segments, different product lines, et cetera. So as we refined our strategy and focused on the areas that we thought would contribute more to our bottom line and also help us increase our relevance with clients by providing solutions. We're now starting to see the momentum of all those actions take hold. So that's been very encouraging. As for why we feel that's going to produce better results, there's a lot of changes. So to borrow John's comment earlier, there's a lot of ins and outs here, lot of different mix scenarios coming in. Our new businesses tend to trend at a lower ELR, expected loss ratios, than we've had in the past. So as those gain more scale, as we exit certain lines, such as our crop operation which is better handled in our reinsurance side, as we deemphasize a couple of other areas that had higher loss ratios, we expect that combination and mix to produce better performance that we've seen historically.

And I think in part, Kai, to answer that, the -- a little bit of market disruption along with, as Jonathan pointed out, the significant capital base that is attractive to our clients and brokers, but that market disruption again allowed us to get very capable people, but also as other competitors were reevaluating their strategies, that enabled us to grow certain segments faster than we might otherwise would've been able to do.

And do you see yourself can get down to the mid-90's combined ratio next couple of years?

Well, one interesting point that we shouldn't gloss over is that the first quarter, while none of the events -- the weather events, catastrophes if you will, PCI events that Jonathan referenced, while none of them reached our threshold for declaring them to be cats, nonetheless, we had $15 million of weather losses in the first quarter of the insurance operations, which amounts to four-and-a-half points in the combined ratio for the insurance results. So as you could see, we're pretty much already where you're referencing.

Okay, that's great. My second question is on the reinsurance side. So I just wonder, is there any seasonality because now you have the crop reinsurance in the U.S. reinsurance book. That would impact your second quarter and third quarter year-over-year comparison in term of the core combined ratio.

Hi, Kai, it's John. There isn't that much seasonality. And crop, while it's a new piece given the move from the insurance to the reinsurance, in the grand scheme of things it's relatively small across the overall global portfolio for the reinsurance operations. So I would say, no, there's not really much seasonality.

So the fourth quarter and the first quarter results should be a good indication for the coming two quarters?

You're talking in terms of loss ratio?

Yes, just the overall, the core combined ratio, attritional combined ratio, because there are probably different mix between loss and, like, commission expenses.

Yes, that doesn't move around all that much because from quarter to quarter based on our pegged loss ratios. Obviously, when we get to the fourth quarter we have our reserve here, and reserve review which could impact the attritional in that quarter. I don't know that you'd refer to that as a seasonality, but our earned premium is earned ratably through the year, and we book a consistent estimated loss ratio absent any [indiscernible] type events.

Great. Just quick number clarification, there it's $30 million Ogden [ph] rate impact, is that already including in this quarter reserve development, or in the fourth quarter one? You said year-end [technical difficulty] reserve…

What I was referencing was that the impact of Ogden in terms of a dollar amount wasn't made known of course until the first quarter. But what I was referencing was that we consider that to be a prior-year event which was more than covered in our year-end reserve review. While not specifically of course an item in the year-end reserve review just like many other discrete events that occur many quarters or years later frankly when you look at reserves pointing this is that our reserve review contemplates the fact that things can go wrong, things can happen, but you cannot specifically identify what they might be. So, our reserve review has a certain amount of conservatism built into it, or I would describe as a fact that the point of the reserve review as an unknown event and we have been in situation it was prior year event for us and well within the balance of being covered in our year-end reserve review contemplations.

It's great. Well, thank you so much for all the answers.

Thank you, Kai.

We will take our next question from Sarah DeWitt with JPMorgan.

Hi, good morning. In the Reinsurance segment, I was surprised with the underlying combined ratio improved year-over-year in what is still competitive market, can you talk about how you're achieving this and how sustainable is that going forward?

The simple answer is, Sarah, is just the changing mix, so as for example as mortgage and other credit related opportunities as that premium begins to flow through the books that carriers a lower loss ratio, combined ratio than which you would think about as the more traditional lines. That's frankly the simplest example of explanation. We will also have quota share coming into the reinsurance book, which also helps maintain that ratio.

Okay, great. And then just a couple of numbers questions, how much did the crop Reinsurance transaction contribute to the top line and then how much is your mortgage and credit business?

Crop was about $50 million.

Yes, $53 million in the first quarter.

Okay. And how big is the mortgage and credit business?

And the total mortgage of gross written premiums, it's about $150 million to $200 million.

Annually?

In the quarter.

Sorry could you say that again?

That's an annual number or in the quarter?

Yes, that's annual.

Okay, great thank you.

We'll take our next question from Jay Gelb with Barclays.

Thanks and good morning. My first question is on the outlook for the, the midyear Florida renewals where I believe you said hoping for flat rates I think it's pretty well understood that citizens insurance capacities can be down midyear in terms of demand for reinsurance protection but I just wanted understand if I have you correctly are you saying demand from other primary writers in Florida is going to enough to offset that.

Well citizen is down because private market as soon much of that exposure so capacity will be soft from private market.

Okay, is there any influence do you think it midyear as a result of Matthew.

We hope we think that there could be some influence but that all dependence on how much capital has been go into the market so look, based on the returns that the industry is producing on overall capital. We do you think it, it suggest that that rate should be in flat but there's no way for us to know what that might be right now.

This is John. There's also other contributing factors with AOB issue that's out there and that impacted people in 2016 including the capital position. The assignment of benefits, so the assignment of benefits issue that happened in that has been happening that has resulted in an increase in the attritional loss ratio for many of the Florida teams and so some of them had to go get more capital or in the process of getting more capital or raising more capital and as reinsurance is the form of capital. And so a lot of them are potentially looking to increase their buys whether it comes, whether that's on a quota share or on an excess loss basis, as well as some of the larger Florida seasons have also been diversifying outside the state, so as they've been growing, they have natural exposure growth for their overall books of business, their reinsurance demands to protect that book have also been increasing and we would see that to directionally to continue.

That is helpful, thanks very much. And then my separate question, Dom, in this year's annual shareholder letter, you talked about the decision to build in the Insurance segment as opposed to buy I'm kind of glad you brought that up in the letter hopefully it's pretty good jumping off point just to touch on it in a bit more detail.

That was specific question.

Yes, just in terms of -- in terms of that decision and kind of where you see the insurance segment going forward?

We have had this view for long time and it's not because we haven't considered opportunities that are out there and our view was based on the fact that integration since we had an existing operation as contrasted with not having one at all, we felt it was easier for us to grow our existing franchise. In the phase of acquisitions are tough because the integration issues are challenged in addition you're not quite sure talent that you're getting, the legacy issues that you might be attaining, there is a whole different face to the market in terms of how a particular company might be presenting itself to the distribution partners, they will have ability to kind of build our message, or culture or products or appetite all those things from the ground up is more attractive to us. And then, of course, it coupled with many of these acquisitions as you know are occurring at tremendous multiples creating lot of goodwill but that aside we are potentially buying businesses that have mid-single digit ROEs that is not and I'm paying a premium for that, that's not all that attractive. And what we think we have done here in the short years has been too we're still in the legacy issues that we've had but you think the current enforce portfolio as I mentioned before. Absent the weather losses as already we had in the first quarter as already in the low to mid single 90s combined ratio so, I think our strategy there is proving to be so far so good one.

And a final one, if I can, the reinsurance performance in the first quarter was incredibly strong especially taking to account it was a worst first quarter for catastrophe losses in the U.S. in over 20 years, is that -- can you talk a little about whether that's risk management program structure primary companies just retaining more exposure, or what -- how come we didn't see more that impact on Everest results on the Reinsurance side?

There wasn't one event right was many events which for the most part has fallen on within company retentions along with the fact that as we've mentioned each quarter for many quarters now we keep, we tend to keep moving up our attachment point there is a most competitive part of the market has been down low. And so, and it have been spreading our aggregate, so we have been diversifying our cap portfolio slightly moving up attachment point coupled with the fact that many scenes as their capital base is going to continue to retain more so it's all of those things not any one of them, but it's all of those things come into play.

Thank you again.

Thank you, Jay.

We'll go next to Joshua Shanker with Deutsche Bank.

Yes, thank you. Can I start with mortgage reinsurance, for a second? I want to know how you think about catastrophe risk versus mortgage reinsurance risk, is it similar and whatever remodeling in terms of its exposure to a mortgage catastrophe, and to how much business is there to be written out, there what's going to cause mortgage insurers want to see that risk in the future?

Good morning, Josh. It's John. So, couple of things, so we have then as we've talked about on the last several calls focused on the mortgage opportunity within a broader credit play that we are doing, but mortgage is a meaningful part of that. And we do see -- so we have focus on that both in the underwriting side but also and arguably more importantly building out underwriting capabilities, analytical capabilities, ERM risk and very technical capabilities for us to be able to think about that really to get it -- to bring it up to the level of, which it has, we have done to the level of how have been moved to best-in-class over the last several years in the property side. So, in terms of how we think about to model it, we look at it from at the macro macro level and how it overlaps in intersection correlates with our asset portfolio. We think about it on an overall economic capital model to the group. We look at it on a realistic disaster scenario. We look at it as total limits that we deploy. We think about across years the correlation and the aggregation that can happen and really try to focus on what the economic situation is today and where we think it will be in the future so to determine how we want to play, where what attachment points we want to play at, how that would impact if something like the financial crisis of 2008 happen again, how that could perform.

So, along those lines, is it normal think that sometime in the next decade, there will be a mortgage ad event? And is there a way to have that occur and avoid the loss of the underwriting?

Well, we have no idea if a loss is going to happen just like we don't know if catastrophe loss is going to happen. We…

I can promise you a catastrophe loss will happen in the next 10 years. I am certain of that.

I am going to write that down. So -- but we -- we're going to build a book and have an underwriting strategy that we think will succeed based on underwriting conditions, macroeconomic conditions, pricing conditions, and we're going to adjust the book. And that's our job. That's Dom and mine and the rest of the team's job to do that to react and how we think the book will best move going forward. But we do –- we certainly manage to idea that a loss could happen and try to think of limits deployed and capital required in that context.

And it's also -- keep in mind that it's -- we tend to agree with you that you have to consider the fact that a loss can happen but it's also where you attach, how diversified you are. There is many factors which go into what the level of loss might be. And from a realistic disaster scenario perspective, the exposure that we have to the mortgage base is relative to property cat risk is much less and of course also relative to our capital, it's pretty small.

And then I guess one more, can we expect that if you've done your homework correctly, a well-run mortgage rebook should outperform primary mortgage book?

I think the strength -- advantages and disadvantages of both clearly from a -- we have decided to make a reinsurance bet on it. And that gives us the benefit of hard dollar limits, that gives us the benefit of retentions, that gives us the benefit of having a compared to running an insurance operation far less resources, both capital and people wise. So, it gives us more ability to navigate the underwriting market, market cycle that could happen. So we feel like -- we feel pretty good about how we're deploying capacity and capital and our underwriting strategy and will be able to hopefully expand it if the market - the pricing and the market conditions allow but also be in a position to dial it back if we don't think we are getting paid a good risk adjusted return.

And then quickly for Jon Zaffino, I want to know how he thinks about one, three, five-year plan? When you started like at the beginning of '15, did you have a three-year plan? Do you have a five-year plan? Wouldn't you sort of in the check points to note that the insurance business is performing in line with sort of the predicted plan on how to get this be important part of Everest Re?

Sure, Josh. We have very much phased out a deliberate roadmap that aligns with what Dom mentioned before about an organic growth plan. What does that look like? What are the key milestones along that journey and how do we get there? So, certainly for us there was a few prominent themes in that process. Number one was sort of foundationally preparing the organization for that journey which is an ongoing everyday type of exercise. Certainly looking to enhance our market relevance in the form of people and products and distribution connectivity has also been very much a part of that. And then, certainly along the path we are going to make portfolio selection along the way. A lot of that work has been at the forefront of our activity in the last several quarters if not year and a half or so. But remember, we are still adding talent as we go here to make sure that we continue keep up with our growth and aspiration. So that's ongoing work. So I would say that we're very much on track. We're going to follow market opportunity where it presents itself. We don't have a sort of hard dollar specific target in mind other than we certainly see a lot of growth opportunity that we want to pursue in our chosen markets. But certainly looking to foundation prepare, refine our operations, add the talent, increase the relevance. There is a lot of work going on day to day which the tactical activity that drives success on the insurance side that we're working hard at across the board.

Well, thank you for all the answers and I appreciate the extra time.

Thank you, Joshua.

We will go next Brian Meredith with UBS.

Yes, thanks. Just a couple of quick questions here; first, I am just curious in the Bermuda segment, what was the current dollar figure of the true-up which you had in the first quarter, just so we get a good sense of kind of what the year over year growth was looking like without this true-ups, the Bermuda segment?

Just one second.

Sure.

Yes, it's roughly about $60 million.

Great, that's truly helpful. And then, second question on the credit mortgage business, I am just curious when you think about the capital allocation to that business, how do you think about it? Are you using call it rating agency models? What are you using in -- and what is the risk here that perhaps has changed and where the rating agency look at the mortgage reinsurance business to get to maybe some type of capital requiring closer to [indiscernible] particularly with quota share, would that change your kind of view of the business?

So, Brian, it's Jon. As a -- I think a couple of things. I think we feel like just overall first principle that Everest given our overall capital position and diversified book business, we feel we are pretty capital efficient in deploying capital in the areas like mortgage. We also know there has been conversations and some of the rating agencies have been looking at this fairly carefully about what the rating, how they should think about the capital required to support this book going forward. More times than not when more capital is required whether it's on the [indiscernible], or the rating agencies that puts pressure on supply. And we do that -- given our strong capital position and balance sheet and ratings, we do that as positive that will drive increases in demand and put downward pressure on supply. So, in terms of we think about it, we think about it as all of the above rating agencies with limits deployed, realistic disaster scenarios, stochastic, pricing, reserving, looking at an overall economic capital model, thinking about the assets and the liabilities and whole balance sheet.

Got you. Great. And then, another just quick question here. Given that you are moving to more shorter tail type businesses which on the liability side with MI and crop and stuff, is that causing any changes in your investment portfolio and kind of where you are going to invest and proceed?

No, it hasn't. The duration on the liability side really hasn't moved much approximately three years - four years, and our asset portfolio is underneath that. So that has not changed.

Great, great. Thanks. And last quick question here, workers comp market, I know you guys did mention that there are some dislocation of the insurance market in general and you are taking immense opportunities there. How about he workers comp market with some of the recent activity that we are seen there, any opportunities there?

In the insurance side?

Yes, insurance side, sorry, yes.

There are a lot of select opportunities. And we have expanded slightly some of our offerings we have expanded into some different states, but only selectively into certain states. California you know which is our biggest comp market, very profitable for us, rates are off a little bit, but we're still very bullish on sector given where rates are. And we will use comp frankly as a competitive advantage. There is a lot of -- a lot of markets we compete against that don't have comp capability and that gives us an edge to get into some other -- some of the other lines of business. So that's how we are thinking about it.

Got you. Thank you.

We'll take our final question today from Nicholas Mezick with KBW.

Hi, good morning everyone.

Good morning.

Good morning.

Thanks for fitting me in. A year ago, you mentioned that you have not done hiring in the insurance division. And in the prepared remarks today, you mentioned due to market turmoil, you have accelerated those investments. At Heartland, I see other underwriting expenses up about $9 million quarter over quarter. Where do you see the notional dollar amount is going in 2017 and 2018 or the other underwriting expense?

I don't know that we have an answer for you on that because it is all dependent on market opportunity. So, we think about it more as an operating expense ratio. And I think where we are at today, we are lower, particularly as the earned premium begins to catch up, because our lead of add for resources is not necessarily plateauing but not going up at the same pace that it has been over the last 18 months as we have been building up some of these new businesses. And as these businesses have - the premium begins to earn in, the expense ratio all other things being equal, should moderate. And as Jonathan pointed out earlier, we will continue to make new additions consistent with what we see as the growth opportunity. So it's a little difficult for us to give you nominal dollar amount because that will emerge as opportunity emerges.

Okay. And one of the governors to that sort of the sub 30 expense ratio target?

Right.

Okay, thanks.

And by the way, if it remained at 30 for foreseeable future again as we pointed out before, most of our competitors aren't even close to us there. So, while everyone seems to be focused on the increase in expenses, reality is that where we are at today is competitive relative to the market.

Just a quick follow-up on that last point, any overrides from the more conservative reinsurance program?

We have overrides in our reinsurance purchases, is that what you are asking?

Yes, that's driving the expense ratio to that sub 30 target?

Not to any significant degree. We do have some overrides but that's not driving.

Okay, thanks guys.

Thank you.

This concludes our question-and-answer session. I'll turn it back to management for closing remarks.

Well, I'll conclude by just thanking everyone for participating in this morning. And as you can surmise from our prepared comments as well as some of the answers to questions, we remain optimistic about our ability to deliver -- continue to deliver solid returns. Conservative management of our cat exposure, solid reserve position along with expense discipline and all that positions us to withstand what the market might bring to us. Coupled with growth into newer product areas and our reinsurance operations as well as what's proving to be a successful growth strategy for our insurance division, these things should continue to help us maintain our above average returns. So, thank you for your interest, and I look forward to perhaps meeting with many of you in the months ahead. Thanks again for participating.

Ladies and gentlemen, thank you for your participation. This does include today's conference. You may now disconnect.