Executives
Jon Levenson - Executive Vice President
Edward J. Noonan - Chairman, Chief Executive Officer, Member of Executive Committee, Member of Finance Committee, Member of Risk Committee and Chief Executive Officer of The Validus Group
Jeffrey D. Sangster - Chief Financial Officer and Executive Vice President
Analysts
Amit Kumar - Macquarie Research
Michael Zaremski - Crédit Suisse AG, Research Division
Matthew J. Carletti - JMP Securities LLC, Research Division
Michael Nannizzi - Goldman Sachs Group Inc., Research Division
Joshua D. Shanker - Deutsche Bank AG, Research Division
Sarah DeWitt - Barclays Capital, Research Division
Mahmood Reza
Brian Meredith - UBS Investment Bank, Research Division
Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division
Ryan J. Byrnes - Janney Montgomery Scott LLC, Research Division
Jay Adam Cohen - BofA Merrill Lynch, Research Division
Alex lopez - Portales Partners, LLC
Ian Gutterman - Adage Capital Management, L.P.
Validus Holdings (VR) Q4 2013 Earnings Call January 31, 2014 10:00 AM ET
Operator
Welcome to the Validus Holdings, Ltd. Fourth Quarter and Year-End 2013 Conference Call. My name is Vivian, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now like to turn the call over to Executive Vice President, Jon Levenson. Mr. Levenson, you may begin.
Jon Levenson
Thank you. Good morning, and welcome to the Validus Holdings' conference call for the year- and quarter-ended December 31, 2013. After the market closed yesterday, we issued an earnings press release and financial supplement, which are available on our website located at validusholdings.com. Today's call is being simultaneously webcast and will be available for replay until February 14, 2014. Details are provided on our website.
Leading today's call are Validus' Chairman and Chief Executive Officer, Ed Noonan; and Validus' Chief Financial Officer, Jeff Sangster.
Before we begin, I would like to remind you that certain comments made during this call may be deemed forward-looking statements as defined by the U.S. federal securities laws. These statements address matters that involve risks and uncertainties, many of which are beyond the company's control. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements. More detail about these risks and uncertainties can be found in the company's most recent annual report on Form 10-K and quarterly report on Form 10-Q, both as filed with the U.S. Securities and Exchange Commission.
Management will also refer to non-GAAP financial measures when describing the company's performance. These items are reconciled and explained in our earnings release and financial supplement. With that, I turn the call over to Ed Noonan.
Edward J. Noonan
Thanks, Jon. Good morning, and thanks for taking the time to join us today. From a financial return standpoint, 2013 was an excellent year for Validus with records for net operating income, gross premiums written and net premiums earned. All of our operating businesses are solidly profitable and well positioned in their markets.
Despite increasingly competitive market conditions, we feel that we position ourselves to continue to perform strongly. Validus group generated $578.7 million in net operating income, a 15.2% return on average operating equity and 12% growth in book value plus accumulated dividends during the year.
Talbot underwriting, our Lloyd's subsidiary, had an absolutely stellar year with $186.5 million in net operating income and a combined ratio of 79.8%. Talbot has grown in size and importance in the market and is one of most highly regarded businesses of Lloyd's.
Validus Re generated $498.2 million in net operating income and a 62.6% combined ratio. Our size, technical expertise and underwriting discipline has established Validus Re as a clear market-leading franchise.
And AlphaCat, our third-party asset manager, performed very well and finished the year with $1.6 billion in assets under management. AlphaCat also launched our fifth sidecar with strong support from long-term investors.
We finished the year with $3.7 billion in shareholders equity available to Validus and a balance sheet that was absolutely rock-solid.
In other key issues from the year, we completed the integration of Flagstone Re, keeping the vast majority of the business we sought to and we recognized very strong profits from the business we retained. Validus Re also announced the formation of Validus Re Switzerland, a platform which will improve our access to certain classes of business and also provide additional operating flexibility in some key jurisdictions.
so with that, I'll turn the call over to Jeff Sangster to walk through the numbers, then I'll come back with more detailed commentary on our business and broader market conditions. Jeff?
Jeffrey D. Sangster
Thanks, Ed, and thank you, all, for joining the call today. For the full year 2013, we have a record high annual net operating income available to Validus of $578.7 million or $5.38 per diluted common share. We also recorded net income available to Validus of $532.7 million for the year and, by doing so, we now have produced a full year profit in each of the years we've been in business. Return on average equity for the year was 14% and net operating return on average equity for the year was 15.2%. Book value per diluted common share at year-end was $36.23, an increase of 12% from the prior year inclusive of dividends. We also recorded record full year gross premiums written of $2.4 billion, representing an increase of $234.7 million compared to the year ended December 31, 2012, primarily due to the agriculture business written of $179.5 million, as well as record gross premiums written for each of the Validus Re and Talbot segments of $1.24 billion and $1.09 billion, respectively.
Speaking in more detail of the quarter's results of operations and financial position, our fourth quarter net operating income attributable to Validus common shareholders was $96.4 million or $0.94 per diluted common share. Annualized net operating return on average equity for the quarter was 10.3%. We recorded net income available to Validus of $95.3 million for the quarter or $0.93 per diluted common share. Annualized return on average equity for the quarter was 10.2%.
Book value of $36.23 per diluted common share represented the increase of 2.4% from September 30, 2013, inclusive of a $0.30 quarterly dividend. Total gross premiums written decreased by 23.9% to $237.3 million from $311.8 million in Q4 2012. The decrease is primarily driven by a decrease in the Validus Re segment. The Validus Re segment gross premiums written decreased by $69 million or 87.1% over the prior year's quarter to $10.3 million, primarily due to the absence of Hurricane Sandy reinstatement premiums of $34.8 million recorded in 2012.
Validus Re net premiums earned on the Flagstone runoff business decreased $26.4 million year-over-year as that book is now fully earned out. Premium estimates on the crop book also decreased during the quarter which had a $10.7 million earned premium impact on the Validus Re specialty line.
Our quarterly combined ratio was 77.6%, including a loss ratio of 41.9%. During the quarter, we incurred no loss events over the $30 million notable loss threshold. Favorable development from prior years was $33.6 million, primarily coming from nonevent reserves.
The prior period developments benefited the loss ratio by 6.8 percentage points. During the quarter, we experienced adverse development on the 2010 New Zealand earthquake of $40.3 million. On the 2011 New Zealand earthquake, we increased reserves by $30.6 million, which was largely offset by allocating the remaining $29 million of reserve for potential development on 2011 events, resulting in a $1.6 million net adverse development. Some of you will be happy to hear that as a result of this allocation, we no longer hold an RDE reserve for any year.
Our agriculture business was impacted by an early frost affecting fruit crops and reduction in commodity prices, most notably corn. As a result, we have booked our agriculture business to a 100% combined ratio for the full year, and we'll [indiscernible] in the first quarter when final client advices are received. Accident year loss ratio, excluding changes in prior accident year for the quarter, was 48.7% compared to 31% in Q4 2012. The full year 2013 accident loss ratio, excluding changes in prior accident year and notable losses, was 44.7% compared to 36% for the full year 2012. The increase in both the quarterly and annualized -- sorry, quarterly and annual normalized loss ratio is attributable to a number of non-notable loss events that were below the $30 million notable loss threshold as well as the increase in the agricultural loss ratio.
Our gross IBNR at quarter-end stands at $1.49 billion, which is 49.3% of our total $3 billion loss reserve. And our net IBNR is $1.3 billion.
Beyond underwriting results, I'm going to comment on the AlphaCat contribution to earnings, general and administrative expenses, the quarterly investment results and our balance sheet.
Before getting into the AlphaCat results, I'll highlight the detail of our AlphaCat 2014 sidecar formation which was announced on January 8. AlphaCat 2014 was capitalized with $160 million, of which 86.25% was from third parties. Investors in the current version of sidecar are primarily a rollover of previous sidecar investors as they continue to be attracted to the risk-reward offered in the structure. As with previous sidecars, AlphaCat 2014 will employ its capital primarily in retro and other high return opportunities.
As we noted during the third quarter earnings call, there have been refinements to the AlphaCat disclosure in the fourth quarter. A brief reminder that we utilize a mixture of equity and consolidation accounting for our AlphaCat operating affiliates.
A new line item, income attributable to operating affiliate investors, is now included in the income statement. This line is essentially a noncontrolling interest as it serves to remove the net economics of certain underlying operating affiliates. Income attributable to operating affiliate investors was previously included finance expenses. The revised treatment will clearly delineate between debt and financing expenses, which will remain in the finance expense line and the economics related to AlphaCat operating affiliate investors, which will be presented in the new line item.
Turning to the results of the AlphaCat segment. AlphaCat contributed $13.5 million to net income in the quarter, net of noncontrolling interest. AlphaCat's contribution to Validus net income is comprised of the following components: Validus share of manager fees in the quarter for AlphaCat is $6 million, while the AlphaCat sidecars and ILS funds contributed $5.5 million of income from operating affiliate in the quarter based on our equity interest in these entities. Realized and unrealized gains on the PaCRe investments retained by Validus are $2.7 million. Validus share of income from consolidated AlphaCat entities is $3 million. Offsetting the above 4 components are expenses incurred by AlphaCat managers of $3.7 million, which brings the total net income contribution to $13.5 million.
Group general and administrative expenses for the quarter increased by $17.8 million over the prior year to $82.9 million from $65.1 million in Q4 2012. The primary driver of the increase over the prior year was the increase in the performance bonus accrual.
Before I touch on our investment results for the quarter, I would first like to welcome Anthony Grandolfo, the company's first Chief Investment Officer, who joined us in early January. Anthony brings with him a wealth of investment experience gained in previous roles with Progressive and, most recently, Universal American. This does not necessarily signal a significant near-term shift in our investment philosophy. However, we believe adding a CIO to the management team is prudent, given an investment environment that continues to be challenging, consolidated investment portfolio that is $8 billion at December 31, 2013.
Net investment income for the quarter was $24.2 million for a full year effective yield of 1.3%, a decrease of 35 basis points from the 2012 effective yield. Duration of the portfolio is 1.6 years at December 31, down slightly from 1.62 years at September 30. In the quarter, we recorded $4.4 million in realized investment gains and $20.1 million in unrealized investment gains on a consolidated basis. Unrealized investment gains were driven by the PaCRe investment portfolio, which contributed $26.6 million to unrealized gains. This is offset by a 90% noncontrolling interest of $23.9 million leaving a net bottom line gain attributable to Validus of $2.7 million from PaCRe.
Total shareholders' equity available to Validus at December 31 is $3.7 billion, and total capitalization available to Validus at December 31 is $4.49 billion.
Debt to capital at quarter-end was 4.9%, and debt and hybrids together as a percent of capital were 15.5%, a marginal increase in financial leverage from September 30 due to our share repurchase activity.
This quarter, we are back in the market to target the utilization of a share repurchase program. During the quarter, we repurchased 3,955,865 shares at an average price of $39.52 per share for a total of $156.3 million., which brings the total number of shares repurchased during the year to 13,667,253 shares for a full year 2013 total of $513.5 million.
During the period from January 1 through Wednesday's close, we repurchased an additional 1,031,436 shares at an average price of $37.37 per share for a year-to-date total of $38.5 million, leaving approximately $308.5 million remaining in our existing share repurchase authorization. We continue to have a substantial margin above our targeted risk appetites.
While we're currently focused on completing our outstanding share repurchase authorization, we may well extend our capital management activity in 2014, and we will be discussing these options with our board over the upcoming week. With that, I'll turn the call back to Ed.
Edward J. Noonan
Thanks, Jeff. Let me start by giving you some further color commentary on the catastrophe market at January 1. The Validus Re U.S. catastrophe portfolio saw a risk-adjusted rate decrease of 12.5%. Risk-adjusted rates for the broader U.S. catastrophe market were up by 15%. The market saw a slight decrease in demand and significant excess supply, and we saw larger clients retaining more risk and consolidating global programs. Interestingly, the excess supply did not look to us to represent the secular shift resulting from institutional money, but rather more like a traditional cyclical overabundance of capital among existing reinsurers. While ILS money played a role, it was rather limited and most pronounced in the retrocession market, which was extremely competitive.
We see normal cyclical competition as the positive sign. Catastrophe risk carries a very high capital charge for reinsurers that tends to act as a floor on pricing. To the extent that the market is driven by reinsurance company competition, we believe we may be testing the bottom. We saw some deals need to get repriced upwards to be completed, which would suggest that this basic discipline remains in place.
Other competitive factors were a drive for more multi-year coverage, inclusion of terrorism coverage in a small number of treaties and an unsuccessful attempt to significantly broaden terms and conditions around the hours, cost and reinstatement premiums.
We also saw an increasingly 2-tiered market split between a small group of large reinsurers and a smaller and following market players. There was clear evidence of this split in a number of what we term club deals, presented to a small group of reinsurers and negotiated very early in the renewal season, which tended to reflect less competitive pressure than the later renewals. This differential extended fairly significantly in some cases, with the top tier reinsurers receiving full signings and in one large case, a very differential pricing than the rest of the market. We clearly benefited from this 2-tiered market and this is one of the reasons that our rate decrease is lower than the broader market.
Given the competition in the market, our job is to garner the biggest share of the better price risk that we can. While there was still a good deal of well priced business in the market, the pool was clearly smaller. We said on our third quarter call that we thought January would be a war for signings and that's very much what played out. Most programs were oversubscribed and the attractive programs and layers were significantly oversubscribed. Despite this, Validus received signings of well over 90% of the lines we authorized. That allowed us to assemble a very high quality portfolio comprised of the business we like best. That's a key differentiator in underwriting performance.
To assemble this portfolio, we had to shrink significantly on some ballrooms and exit others entirely, not something we take lightly. Much as we would like to use all of our capital in the business at all times, we will shrink our exposures where rates are inadequate and rightsize our capital to meet the opportunity at hand.
We were also a significant purchaser of retrocession at January 1 and we're able to restructure our outward protections to provide significantly broader coverage without increasing our dollar spend. In this regard, we see the lower cost of capital, than institutional money, as being an asset to traditional reinsurers in a competitive market.
Moving outside of the U.S. market environment, the European catastrophe market was also quite competitive with rates up as much as 10% in some countries. Loss-affected accounts did see increases and our overall rate decrease was 8.7%. We were able to grow our specialty treaty portfolio very strongly at January 1. Specialty includes our new trade credit business, which I'll touch on later. We also had very good success with hybrid composite coverage sold primarily to the Lloyd's syndicates. Our ability to craft ing price-unique coverage gave us a competitive advantage in this area.
Our marine portfolio, which was another bright spot, saw a rate increase of 3.5% on the heels of 35% rate increases in 2013. As I mentioned, Validus Re added a trade credit team in Dublin during the quarter. The product is a good fit with our business model and we have known the lead underwriter for many years. We're writing vanilla commercial trade credit on a quarter share basis behind the 4 large trade credit insurers. At January 1, we wrote $50 million in premium through this group. In the aggregate, we continue to build more product diversification into our treaty portfolio, which is particularly valuable in the softening catastrophe rate environment.
In terms of loss activity, the 2 notable items in the quarter were development on the first New Zealand earthquake from 2010 as well as slippage in our agricultural book loss ratio due to late-season freeze in California and a couple of key corn states underperforming.
We hate having to talk about adverse development on older claims. If you recall, New Zealand suffered 3 earthquakes in and around Christchurch in late 2010 and 2011. One of the key issues in determining ultimate losses was the determination and allocation of loss between events. Until this quarter, we have perceived greater potential volatility around the 2 earthquakes that took place in 2011. However, one of our larger Australian clients advised the market of a very large increase on the 2010 event, and that was driven by a few factors. Two of the largest risk claims in the market reached a settlement with an allocation among events quite different than what the market was expecting, pushing a much higher proportion of the loss into the 2010 event. Also, additional housing allowance cost associated with new claim reports as well as existing claims that have been slow to be advised by the New Zealand Earthquake Commission drove up the claim.
Additional housing stock was either declared uninhabitable or in need of remediation and, in some cases, this has also led to loss of value of land claims. We chose not to offset this increase on the 2010 earthquake against existing IBNR as we remain wary of the situation regarding this event, hence, the increase in both our event and IBNR reserves for a total of $40.3 million. I would note that Validus' group reserve levels remain unchanged year-to-year relative to actuarial indication.
Turning back to the 2011 New Zealand quake, we allocated the remaining $29 million of RDE to this event, again, in light of our concern about volatility around settlement and allocations. This is exactly the type of scenario that caused us to create the RDE and, in this case, it allowed us to almost completely avoid adverse development on 2011 events.
For the agricultural business, we're following customer loss estimates, which moved upward in December. The underlying drivers of the decline in the price of corn over the growing season, a late freeze affecting California citrus and delayed planting claims in a couple of key states due to the wet spring. I'd also note that loss adjusting has been slower than normal this year due to the harsh Midwestern weather.
Turning to Talbot underwriting, while results continue to be excellent, competitive conditions in Lloyd's continue to build. We saw a rate decrease of 3.2% across our portfolio at January 1. The largest decreases were in property treaty at 12.1%, financial institutions at 18.9% and the aviation airline account at 15%. Given the margins across our portfolio and the leadership position we enjoy in our core classes, we still see good returns despite increasing competition.
Talbot also saw a return to a more normalized attritional loss ratio after 3 quarters with extraordinarily low loss events. There's no underlying issue involved, but rather a return to what we would normally expect to see. Talbot had an outstanding year and their position in the market continues to grow in importance. We have an excellent team in London, and the combination of strong underwriting and prudent reserving makes them a top-performing syndicate.
And while we see more competition in Lloyd's, the investments we've made in Singapore, Dubai, New York and Miami will serve us well as we expect to see better growth opportunities in these territories. We would love to replicate the Talbot business model in multiple jurisdictions and we had very good results in our foreign offices in 2013. We believe we should be comfortably able to grow in these regions faster than the global economy as our products fit nicely and more business is staying in local markets rather than coming to London. 12% of Talbot's business came from our overseas office in 2013, up from 0 in 2008. We expect this trend to continue, which will give us some insulation from the competitive pressures in London.
And turning to AlphaCat, our performance continues to be quite good. AlphaCat has established a firm position in the third-party asset market. We now have a mind to take on much additional capital. Last year, we did not see good opportunities to put extra money to work. However, we did put in place our fifth sidecar at January 1 with $204 million of limit fully deployed. This vehicle focuses on lower layer risk and is placed predominantly with investors that have previously been with us, which we see is good affirmation of the results that we've delivered for our investors. We do see further potential opportunities for AlphaCat investors in 2014 but, to some extent, that depends on our view of competition and catastrophe rates in the runoff to the next renewal period. So with that, we'll be happy to take any questions you may have.
Question-and-Answer Session
Operator
[Operator Instructions] And our first question comes from Amit Kumar from Macquarie Capital.
Amit Kumar - Macquarie Research
Just a couple of questions, I guess. First of all, a clarification on the 2010 losses. You talked about one large cede and raising their estimate. Our understanding is that in conjunction, Lyttelton Port settled with 3 primaries, are we talking about the same thing here regarding the loss development or is that a separate piece?
Edward J. Noonan
Amit, 2 things happened. Both the Lyttelton Port and the Ministry of Education settled their claims. They were 2 of the largest risk claims in the market. The industry had been relying on the allocation between 2010 and 2011 events that we've seen up to date. The Lyttelton and Ministry of Education settlements changed that and, essentially, set new precedence, pushing more loss back into 2010. Now you have to bear in mind that the market share of the Australian companies, some are predominantly personal, some are commercial, and so it doesn't affect all companies equally. But in this case, the ceding company notified us and the entire market back in October that they were increasing their 2010 loss reserve by AUD 600 million based on new allocation, hence, we need to increase our loss reserves following them and added additional IBNR on top of it.
Amit Kumar - Macquarie Research
And I guess a lot of investor feedback has focused on what might be the full limit losses if NZ1 and NZ2 continues to creep up. Can help us on that, please?
Edward J. Noonan
Well, for 2011, we officially have all limits reserve, as they say, that was the year that we were more concerned about from a volatility and variability standpoint. And so, we have de minimis exposure on 2011 catastrophe business in New Zealand. 2010, we hadn't reserved all limits because events wasn't nearly as large and didn't have the same dynamics. I don't have the limit outstanding in front of me. And in talking with other Australian clients, they have not increased their loss reserves. They have actively told us that they've evaluated and not increased their loss reserves. So we're still in kind of the mode of saying we need to understand better why our one large client increased their reserve quite so much, how much prudence they added to what they thought their exposure was in light of the fact that other companies are already increasing it. But of course, the bottom line and the reason why we didn't offset 2010 against IBNR anywhere was that 2010 now has to be viewed as a bit more volatile then.
Amit Kumar - Macquarie Research
Okay. The only other question I have, and this is sort of switching gears and I'll come back later. I guess moving on to the crop book and the recent cold spell, if you will. How does that change your thought process for 2014? And could there be a potential sort of impact in Q1 results?
Edward J. Noonan
I think, Amit, 2014 crop rates will now incorporate both 2011 and 2012, which were particularly bad years. So we expect overall rate rise in the crop business, the multi-peril crop business, to be more attractive in 2014 than it was in 2013. The dynamics in the crop business this year were completely different than what we saw in 2012, 2012 being essentially a drag year. This year, drag wasn't a consideration with the exception of a relatively small number of counties. What we actually saw was claims from excess moisture in the spring. And the big impact of the weather in the fourth quarter was really just slowing the adjustment process and, I think, typically, we would expect to have the better final modifications by now than we've gotten from seasons, but we rely on our ceding companies. We don't have any ability to have a different view of settlements on crop claims. And so, they're in the process of wrapping that up and we'll know over the next month or 2 much better what the final 2013 numbers look like.
Operator
And our next question comes from Michael Zaremski from Crédit Suisse.
Michael Zaremski - Crédit Suisse AG, Research Division
A lot of great info in the prepared remarks, so I apologize if maybe some of this has been answered. But if I look at the underlying loss ratio in Validus Re, it seems to be at least 10 points higher than what you guys would target. I know you guys talked about a number of non-notable losses below $30 million. So is most of that crop that's impacting the loss ratio or are there other events?
Jeffrey D. Sangster
Mike, it's Jeff Sangster. Good observation on the 10 points. So just as a reminder, we have really 3 buckets of our reserves. We have the notable losses, of which there were none in the quarter, and pure attritional. And then we have the non-notable losses, which you're referring to. So looking at Page 24 of the sup and the Vali Re segments, as you can see there, the normalized loss ratio, excluding notable and PPD, is about 42.9%. That is about 10 points higher than we expected to run on a regular basis, on kind of purely the attritional. And there's really 2 things driving that on the Vali Re side. One, as you point out, is the ag increase in the combined ratio. That's about 7 points or a little over $10 million. And that's -- no, sorry, 7 points on the business, which is about 4.2 points on the loss ratio. And then we had various other smaller events that didn't hit the threshold. Including on that list are the 2 U.K. and European windstorms, and the Typhoon Haiyan that went to the Philippines, and the total of that was about $14 million or 5.6 loss ratio points. Combine those 2 for about 9.8 loss ratio points and take that off the 42.9% takes us down to 33.1%, which is right where we expect the run rate to be.
Michael Zaremski - Crédit Suisse AG, Research Division
Okay, that's helpful. I guess next and lastly, Ed, in the prepared remarks, you talked about why there's some evidence of prices potentially reaching a floor. I guess I was hoping you can elaborate on that. And I guess if, let's say, you're right, does that dynamic -- is that dynamic in play for June and July as well or that would only be in play for next year kind of January 1, 2015 renewals?
Edward J. Noonan
Yes, Mike. So first, I want to be careful. I don't want to create any firm view that the market has hit a bottom. But the fact that we're in a very competitive market, one push too far, deals couldn't get done and had to be repriced upward suggest that the market is still driven by reinsurers who have a high cost of capital for natural risk and have to go with that cost of capital. Hence, that could be a sign that we're starting to scrape the bottom. And our expectation is -- we don't like to forecast rates forward and we certainly don't like to talk down the market. If you look at what happened in Florida last year, rates were up pretty sharply and the rest of the market at July 1, rates were up not quite as sharply as Florida. And then January 1, rates were up more. So it isn't unreasonable to think that July 1 this year would come in line with what we saw at January 1, when you add last July 1 and this July 1 to get to the same kind of overall rate level. Florida is a different story because there are so many different moving pieces and dynamics there and shifting demand and that is -- Florida is where our ILS capital matters. ILS capital doesn't really play anywhere near the role in the January 1 to July 1 that plays in Florida, and that's just because of the rate intensiveness of that marketplace. So I think there is at least some indication that we may be kind of scraping the bottom. Certainly, the fact that we see the market being driven by reinsurers not ILS capacity suggest to us that how we look at the return on capital and on some of the deals we saw and said, "Well, there's just no way that you can cover your cost of capital if you write that." And so, that may be, at least, a green shoot in that sense.
Michael Zaremski - Crédit Suisse AG, Research Division
Okay, that's helpful. And just lastly to clarify and a follow-up to Amit's question, there's no -- we don't have a clarity on the limit on the New Zealand losses for the 2010 year, that's correct?
Edward J. Noonan
Yes. [indiscernible] just in kind of putting the numbers together for the call, we have to pull together, that was both Flagstone and Validus involved in that event. And actually, Flagstone a slightly larger market share than Validus on the program in question. And so, just going back and making sure that we've got the numbers right on the other basically Australian seasons that are out there, we don't have finality on that yet.
Operator
And our next question comes from Matt Carletti from JMP Sec.
Matthew J. Carletti - JMP Securities LLC, Research Division
Mike and Amit covered most of my questions, I just wanted to follow up on the -- maybe another way to ask about kind of New Zealand 2010 and kind of getting some feel for where it stands. Are you able to tell us, roughly speaking, how -- the reserves you have set for that event right now, percentage-wise, what's in case? What's in IBNR? And did IBNR -- did you to keep it stable or did you add to it with the most recent notices?
Edward J. Noonan
Go ahead, Jeff.
Jeffrey D. Sangster
Sure. I just went through the numbers and just to add a color. The $40.3 million that we added to New Zealand '10 is almost entirely at Vali Re, $40 million of that, with just $0.3 million coming from Talbot. That $40 million breaks down $25 million case and $15 million IBNR. And then, further breaking that down, following on Ed's comments, between Vali Re and Flagstone, the IBNR of $15 million is split evenly. $7.5 million came from each of the Vali Re and Flagstone books. And then the [indiscernible] of the case was $10.8 million for Vali Re and $14.2 million for Flagstone, so that the total of the -- breaking down the $40 million between Validus and Flagstone is $18.3 million and $21.5 million, respectively. So we did add IBNR. We do continue to carry IBNR on -- at the event level on 2010.
Edward J. Noonan
The only thing I would just add is that we don't have perfect clarity on how much conservatism was built into the clients' reserve increase, how much IBNR is embedded in the $600 million that they reported after the market. Given that they are an outlier relative to their peers and they've suggested to us that they've been rather prudent in the number they put up, we need to kind of get better clarity around that.
Matthew J. Carletti - JMP Securities LLC, Research Division
Yes, and then maybe just one last question on it. Ballpark of probably you want to state it on your exposure with these limits or reserves, that one client, how big a relationship is that of the total exposure, the other clients, is it half of your exposure, is it quarter of your exposure? Just a ballpark would help.
Edward J. Noonan
It's certainly a big relationship matter. The thing that I'm trying to do math in my head at the table here, which is probably dangerous. Flagstone had one proportional account involved, and so trying to come up with a sense of what the overall market limit is. Let me make this -- it was a -- this particular customer is a big Validus customer, slightly larger. Flagstone customer between us, I think we had a little over 7% of the account. And so relative to the overall limits outstanding, I'm not sure. I wouldn't cite a number because I may end up looking foolish. I'm going to have to come back and correct it, but as soon as we can give you a better number, we're happy to.
Operator
And our next question comes from Michael Nannizzi from Goldman Sachs.
Michael Nannizzi - Goldman Sachs Group Inc., Research Division
I guess one question on the specialty business you wrote at [indiscernible]. Can you -- what type of business is that? I'm guessing that's not ag. And what sort of margins should we be thinking about for that business given that it's not really contributing a big part of Validus Re?
Edward J. Noonan
Sure, Mike. I'll give you the breakdown of the increase. If you're looking at Page 3 of the earnings release, you will notice specialty increase of $48.5 million. Breakdown into 3 buckets. One is the trade credit business that Ed mentioned, which was $15 million. Second is composite business, which we increased substantially, and that was $23 million of that, and then a couple of smaller increases on tech lines, which were $6 million, and then we increased our terror as well by about $4 million, so reconciling those all comes up to about the $48 million difference.
Michael Nannizzi - Goldman Sachs Group Inc., Research Division
Got it. And what type of profitability or capital efficiency should we think about there? So just trying to think about how that should impact earnings going forward? Just I'm sure it's not going to be down where the property Cat business is in terms of the loss ratio. Is it going to be more like Talbot's business or somewhere between?
Edward J. Noonan
The trade credit business, Mike, tends to run 10% to 12% underwriting profit margins. That's our expectation on it. And the composite business, I'll just give you a little bit more background on it. It's an aggregation of coverages provided mostly for Lloyd's syndicates. It's a difficult product for many reinsurers because you have to price multiple classes and expense multiple departments in a typical reinsurance operation. So we got a very nice niche there and not a whole lot of competition. The margins on that product are in the 30% to 40% range.
Michael Nannizzi - Goldman Sachs Group Inc., Research Division
Got it, great. And so I guess, looking forward now to the aggregate book for Re relative to the first half of '13 is probably the best comparison. How should we generally think about what the outlook should be? I mean, you've got a mix change, you've got a decline in price. I don't know exactly how to incorporate that. I'm sure there's some decline in top line and also some decline in margin. But how should we think about the earnings power of Validus Re from here if this mix kind of remains in place?
Edward J. Noonan
Mike, inasmuch as I don't give guidance...
Michael Nannizzi - Goldman Sachs Group Inc., Research Division
No, I understand.
Edward J. Noonan
That's a dance between the raindrops a little bit on this. I mean let's be honest, clearly 2014 is less good than 2013, right? We know that rates are off in most classes. And the offset for that, our ability to reshape our portfolio and reaction to declining rates and our ability to effectively hedge the portfolio using outward protections. In the aggregate, when we look at loss ratio, I'll just think about catastrophe as much as our core product, the catastrophe loss ratio year-on-year deteriorated, I'm going to say, probably by about 400 to 500 basis points. And interestingly, still below the long-term catastrophe ratio that we've always assumed and actually was in our original business plan. But the catastrophe loss ratio deteriorated by about 4 to 5 loss ratio points. Across the entire Validus Re portfolio, rates were up between 8% and 9% when you aggregate everything. And you can't simply take that as an 8% decline in margin because there's things like commission on some of the business and that. And across Talbot, the 1 1 renewals we looked at 3.2% off. There are some classes there, property treaty book [indiscernible] of 1 1 and that was a big rate decrease that really doesn't reoccur very much across the year. But I also do think there's more competitive pressure building up from it. So a lot of it depends on which classes are affected. But I think Validus Re, as I said, we're probably up 8% to 9% rate. Talbot is up 3.2% If I had to bet, I would say that the trend line on Talbot probably deteriorates not horribly, but over the course of the year, there's more competition and more people looking to write business. And so that 3.2% probably goes to 4% or 5%, something like that, from a rate standpoint. Hopefully, that gives you enough to work with, to start thinking about margin.
Michael Nannizzi - Goldman Sachs Group Inc., Research Division
No, I appreciate that. Switching gears, I guess, deployment. So if the capital intensity of the business may be decreasing a bit next year, can you talk about how you're thinking about share buybacks and the ability to potentially deploy more than you earn or more than you generate in terms of cash?
Jeffrey D. Sangster
Yes, absolutely, good question. That's very topical and it's very around this time of year once we get a sense for the 1 1. We started incorporating that into the model, as well as the PMLs that we disclosed in the supplement, and as we're working through what our excess capital position is. Obviously, current valuations, share buybacks continue to be attractive. As I mentioned earlier, we have over $3 million, which is $300 million in our authorization. We, at this point, would anticipate fully utilizing that in 2014 and likely adding to it in some respect. As I said, that current valuations we view buybacks as attractive. And so in terms of the method of capital management, we would definitely be leaning towards share repurchase in some form at this point.
Edward J. Noonan
We like the way we think about that. We know our balance sheet really well. We know our reserve strength really well. And so when we look at book value, we make some mental adjustments ourselves as to what we think the true adjusted book value worth for the company is. What we do in some of the parts of think about the actual embedded value in Talbot, for example, we tend to think about repurchase being attractive, considerably above stated book value. And clearly, at current levels, it's considerably more attractive than where the share price is trading. And so we have a material excess capital beyond the current authorization. It wouldn't be our intention to lug it around all year and hurt our ROE, and particularly the share price is trading at what are attractive levels for a buyer, I would expect us to be pretty aggressive buyers of the stock.
Operator
And our next question comes from Josh Shanker from Deutsche Bank.
Joshua D. Shanker - Deutsche Bank AG, Research Division
I wanted to follow up on Mike's question a little bit. So I noticed you bought a bunch of shares in January while you guys were in a quiet period. Can you talk a little bit about with I guess you have an ongoing authorization to buy irrespective of -- through the year. What exactly are the dynamics of the program in place right now?
Jeffrey D. Sangster
Yes, sure. So just before we go into the blackout period, we consider whether we want to buy in the period. And if we do, we put in the 10b5-1 program, where we set a grid based on the share price and really kind of look at trailing diluted book value as one of the primary metrics going into that. We set that grid and then with a partner who buys off that grid obviously. In the blackout period, once that sets, we can't touch it and it's on autopilot. And so generally, that grid gets more aggressive as the price goes down towards book value. And so that's our common practice in the blackout period. Generally, when we're in non-blackout, we're working off a grid as well, but obviously, as we have a lot more flexibility to adjust that on-the-fly.
Joshua D. Shanker - Deutsche Bank AG, Research Division
And Ed said during the last question that you guys makes your own adjustments into book value for what you think the embedded book value is. I do that too. But the quarter was a $40 million charge for New Zealand quake tends to make me a little nervous about my ability to suggest that your guys' estimates of losses are on the conservative side. When you have a loss, how does this factor into your current view of what you think that your embedded book is due to conservatism?
Edward J. Noonan
So let me add to that for you, Josh. I think I'd probably disagree with you fairly considerably about whether or not we reserved conservatively. Earthquakes in Metropolitan areas when you have multiple earthquakes over a relatively short period of time, trying to determine the damage was done by which earthquake I think is a rather complex thing. We certainly could have simply offset 2010 with IBNR and said, "Hey, no adverse development to the quarter. Actually we didn't have adverse development in the quarter, we had favorable development in the quarter." We chose not to do that because we really like being prudently reserved and we look at this and said, we don't want to deteriorate our reserve margin as a result to this event. It's new information, very new information, materially new information. And so we simply put the numbers up that may added more IBNR to it rather than taking down IBNR elsewhere. So obviously, you need to develop your own comfort with how we reserve our business, but I believe if you track it, I'm hard pressed to remember a quarter when we didn't have material favorable development on our business. And so certainly, we could have offset this or a much larger loss with simply releasing IBNR elsewhere and we chose not to, which I would tend to think of as conservatism and prudence in loss reserves.
Joshua D. Shanker - Deutsche Bank AG, Research Division
And do you have any sort of guidelines for us to think about whether you think you get a loss and you come up with a midpoint of the range, and to what degree your reserve is set up in regards to your estimation of the midpoint.
Edward J. Noonan
No, we don't do ranges and midpoints. We come up with our best estimates on a case basis, which is informed by clients' advices to us plus additional case reserves that we determine are appropriate case-by-case. We add to that IBNR based on our uncertainty and expectation of variability around the outcome. And then in some years, we look at it and say, hey, multiple events in the urban area, we should add a reserve for development on events on top of that because of the unpredictability of the outcome.
Operator
And our next question comes from Sarah DeWitt from Barclays.
Sarah DeWitt - Barclays Capital, Research Division
On the January 1 reinsurance premium volume at Validus Re, what drove that 25% decline in U.S. property? You said prices were down 12.5%. So did you non-renew a lot of business?
Jeffrey D. Sangster
Yes, that's a combination of business that we non-renewed and the pricing. Obviously, the non-renewals are driven by pricing as well, but it's a combination of those 2. As you'll know, when you compare it to the decrease in cat, not all of that business is cat, and a lot of non-cat, U.S. business renews at 1 1 as well, and I'll see and so you note the significantly smaller decrease in the cat line.
Edward J. Noonan
And so in the non-cat business, where margins are lower, it's not just not as much room for the type of competition we're seeing. And so that caused us to have a disproportionate amount of non-cat property business that we got off of.
Sarah DeWitt - Barclays Capital, Research Division
And then can you just talk a little bit about your appetite for M&A and what you're seeing in terms of the landscape there?
Jeffrey D. Sangster
From a strategic standpoint, there's a couple of territories that fits our business model well or either not represented or underrepresented. And so we're always looking. We find valuations to be very high today and we also find it very difficult to find many companies that we think fit our business model. If you take a market like the U.S., we've been growing our business, our direct insurance business in the U.S. through Talbot. We have an office in New York that's growing very nicely, writing energy, terrorism, marine, et cetera. And so that's another good outlet for us. If in fact, suddenly, the company valuations in the U.S. became much more reasonable and we thought a good fit, then that would make a good potential M&A target for us. We will probably consider growing the syndicate. We haven't thought about M&A in the syndicate in the past. But in fact, Talbot has really developed into an excellent business at the management team that we think can easily manage a larger enterprise. But again, valuations in Lloyd's are pretty high, and I think it'll be hard to imagine seeing too much as attractive. Other than that, there's always the unique opportunity that comes up. Somebody who's trying to sell themselves at a very, very low price where we think that we can offer better value to that shareholders, that type of thing. But from an M&A standpoint, those are the 2 buckets we think of as strategic and opportunistic. And right now, the strategic is pretty expensive, everything that we look at.
Operator
Our next question comes from Mahmood Reza from Omega advisors.
Mahmood Reza
Most of my questions were asked already, but the last one is, [indiscernible] reconsidering the dividend? Or just at the current stock price, do you feel like buybacks because it's the best use of excess capital?
Jeffrey D. Sangster
Yes, I do think you're right. We think buybacks makes the most sense. We like our regular quarterly dividend where it is. We think that's a nice yield on the stock. And at current valuations, buybacks are more attractive when compared to other options like special. So these valuations dictate that it will be all buyback all the time.
Operator
And our next question comes from Brian Meredith from UBS.
Brian Meredith - UBS Investment Bank, Research Division
Two questions for you all. The first one, hopefully a simple one here, I was noticing that your aggregate is actually up at January 1, yet in U.S. hurricane, you're just seeing your PMLs, particularly for the 20-year and 50 years down. What's going on there?
Jeffrey D. Sangster
Yes. Yes, Brian, good question. [indiscernible] we shifted it up in a curve. And so if you'll notice on the PMLs, we reduced our PMLs at the 1 and 20 and the 1 and 50. The 1 and 100 is simply flat, which is based on the reduction of business, the reduction in pricing, offset by this upward shift in the curve. And so we're taking more aggregate at higher levels and essentially driving a larger aggregate and flat 100 U.S. went.
Edward J. Noonan
Yes, what happened Brian. Flagstone had in place the Montana recap on last year and so that would have been an offset to our aggregates. That wasn't a particularly good fit for our portfolio. It rolled off, I think it was December 31. And so that actually would have notionally increased our aggregates. We also -- I mentioned, we bought more effective retrocession. We bought aggregate coverages here. Much more effective, we bought a bit lower down on the curve, which affects PMLs across the curve, if you look at the 1 and 20 PML, you'll notice a significant difference. But we bought at a slightly less limit so far as well. And so for having bought less limit, that too would tend to drag the aggregates up, all at the same time, the attachment point is driving down PMLs.
Brian Meredith - UBS Investment Bank, Research Division
Okay. Well, that was my next question as far as what you're doing with your retro and reinsurance buy. And I guess my question is even though rates were down and you kind of gave us the numbers, what's your kind of effective risk-adjusted rate decrease given your reinsurance buy? Did it offset any in it?
Edward J. Noonan
Yes, absolutely. I mean, but I think in the aggregate, because we bought aggregate coverage, it's difficult to embed the margins on the outward reinsurance, which is both the current and aggregate base and offset it against what is essentially in the current portfolio and come up with one clean number. But the U.S., the [indiscernible] treaty book was up about 12.5%. And certainly, the outward retro we bought has a meaningful impact in offsetting the part of that rate increase, particularly because we attach around 1 and 20 year level. That makes it much more valuable retrocession to us. And then the aggregate nature of it makes it more valuable. So I don't want to quote a number because I suspect my actuaries would immediately disagree with me, either high or low and I'd have to let them apologize to them to.
Operator
And our next question comes from Meyer Shields from KBW.
Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division
Ed, I just want to clarify one thing that you said. You talked about how the competition look more like traditional reinsurers that are very well capitalized rather than external capital. Was that behavior reflected in the sort of pushback when maybe brokers tried too hard? Or is there some other issue that led you to that conclusion?
Edward J. Noonan
No. Actually, that operation is really based on just watching every placement in the market. You have a pretty good idea. The broker coming to you and the placement is telling you, while all these layers are into the ILS market or in the collateralized market. And so our observation was that the ILS market stayed up at the attachment points they've been at, customers didn't have interest in involving them broadly across theirs program. And so, we are really competing with traditional reinsurers in the same space. Certainly, traditional reinsurers followed us in pushing back on some of the self-enabling terms and conditions. I don't -- those terms and conditions wouldn't have flown, I think, in the ILS market at all, but it was never an issue. Just kind of one more indication that the people kind of behind it from the charge were traditional reinsurers.
Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division
Okay, that's helpful. And second, again looking at the 1 1 renewals and the market increase in specialty over profit, should that translate all by itself into maybe higher attritional losses with less volatility?
Edward J. Noonan
Could you repeat that one more time?
Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division
Yes, I'm looking at the shift in terms of which product line you find attractive at 1 1 and the growth in specialty and the declines in U.S. and international property. Does that shift, setting aside all of the issues with rate, does that itself translate into maybe higher attritional loss ratios and less volatility in these notable range?
Edward J. Noonan
Yes. I think that's actually a good point. The trade credit business which tends to have a higher attritional loss ratio expected or in the absence of attritional loss is a higher commission ratio. But it is a much less volatile line of business. The composite product that we sell, I think, looks and acts more like catastrophe, although it covers multiple classes. And so that, I think, is more catastrophe-like, both in terms of margin and in terms of how we would perform. So the volatility is different than U.S. property exposure or even European property exposure, but it's still going to be volatile like the marine and energy business tends to be.
Operator
Our next question comes from Ryan Byrnes from Janney capital.
Ryan J. Byrnes - Janney Montgomery Scott LLC, Research Division
I'll be disappointed never to talk about RDE for a while, but I wanted to just a question of...
Edward J. Noonan
Yes, you and us both.
Ryan J. Byrnes - Janney Montgomery Scott LLC, Research Division
But I just have a question about I guess your willingness to, I guess, to shrink your capital base I guess through repurchases and dividends throughout the year, and then also I guess how that also -- how you played that against being part of the club deals for this property cat offerings. I just want to see how you guys -- can you be willing to shrink your capital base and still have access to those offerings.
Edward J. Noonan
Yes. Ryan, that's actually an excellent question and it is something that we think about very actively. Certainly, beyond the current authorization, we have room to manage capital further without the sense that we're crossing over into some area where we're no longer as significant. It's really as much a function certainly of the line of sight that we're able to put out. And this is where actually the AlphaCat strategy is also invaluable to us and that there are any number of places we're on very large programs. Validus Re will put down a very big line and AlphaCat will put down a rather large line side-by-side, which really makes us much more important to the client. And so that gives us a little bit of space in that regard as well, but there is certainly -- there's some point and it's a bit subjective, but there's some points below which you can't shrink and still matter in the reinsurance business. And that, at some point, could create the case where we say, "Gee, we are lagging around excess capital because we're not going to give of our franchise." I feel like we have room before we approach that. And to the extent that we just keep adding earnings -- this year's earnings to share repurchase, that clearly this doesn't create any issue for us. But as I said, I think we probably have room beyond that as well.
Operator
And our next question comes from Jay Cohen from Bank of America.
Jay Adam Cohen - BofA Merrill Lynch, Research Division
A couple of final things. The drop or the change in the crop premiums, that negative $10 million or so, what specifically did that relate to?
Edward J. Noonan
Yes. Really, that's just -- the way that the crop premiums are written is it's an estimate that is booked in the first quarter. And then as the year progresses and we get better clarity as to exactly the acreage it was planted and so on, then that adjusts throughout the year. As Ed said, potentially, we might have better clarity on that earlier. But usually, that's a Q4 event where that's adjusted to actuals, and we'll continue to reassess that in Q1.
Edward J. Noonan
That has nothing to do with us, Jay. That's 2 different part of the products that's based -- the final price is determined by crop prices and actual number of acres planted, and that's not knowable until you get out to September and maybe even to October. And so we just move -- our seeding companies make their best estimates and then we wait to throw it up.
Jay Adam Cohen - BofA Merrill Lynch, Research Division
And then secondly, on the investment income, if you looked at the new money yields where you're investing today in your current portfolio yield, can you say at this point if we are at a bottom from a yield standpoint? Or should we see some additional drop in the portfolio yield in 2014?
Jeffrey D. Sangster
Yes, Jay, obviously, we're not going to try and predict the shape or the direction of the yield curve. And that's, if anything, the last that you could tell us [indiscernible] but what we're seeing right now is that, that 1.3 that we're currently earning, that's kind of our new money yield, so we feel like we're on a flatline there until something substantially shifts one way or the other. So we do feel like we've hit kind of the equilibrium there, if you will.
Operator
And our next question comes from Alex Lopez from Portales Partners.
Alex lopez - Portales Partners, LLC
Most of my questions have been answered, just some housekeeping. I guess since September 30, has any RDE been allocated for 2012, 2013 net of the losses?
Jeffrey D. Sangster
We have no RDE established for 2012 or 2013, given that there wasn't the circumstances of multiple large events occurring in those years. So as I noted, at this point, after the allocation of the 2011 RDE of $29 million to New Zealand at 2011, we now have no RDE established for any year.
Operator
Our next question comes from Ian Gutterman from BAM.
Ian Gutterman - Adage Capital Management, L.P.
Let's see, I guess first, Talbot. The accident loss ratio was well above trend. I assume there were some of these non-cat large losses there. Can you talk about that?
Jeffrey D. Sangster
Yes, sure, Ian. Yes, [indiscernible] and it's the same story. The Philippines typhoon had an impact on the Talbot book as well, about $4 million or 2 loss ratio points. And then we also had a cargo loss and a construction loss that were $10.1 million and $5.2 million, respectively, or 4.9 and 2.5 loss ratio points. Adding those all up, that's 9.4 loss ratio points and taking that off the normalized loss ratio of 64.5 that you see on Page 24 of the supplement equates to a 55, which is going to be in the ballpark of what we expect.
Ian Gutterman - Adage Capital Management, L.P.
Perfect. And then on the Flagstone portion of New Zealand, I guess the only interesting thing that surprised me you've bid on that was, given at the time of the acquisition, you put it back to your reserves, right, but that would -- I guess if you made me guess what those, I think, it was $70 million was for, I would've guessed loss of like New Zealand would have been a chunk of it. Was that a bad guess on my part or maybe you can explain why that didn't help.
Jeffrey D. Sangster
Yes. No, I think that's right. We put up $76 million which essentially was just reserving the Flagstone book the way that we would reserve it for Validus as it had always been a Validus book. Obviously, that has proven to be prudent over the course of the year. Our total net PPD, including the New Zealand development on that book in 2012, was adverse of $1.6 million. So offsetting the $21.7 million that we took in the quarter on New Zealand on the Flagstone book was $20.1 million of favorable development. So we feel like we've got that right, and the Flagstone book is kind of running off as expected. Obviously, in retrospect and in the benefit of hindsight, it makes the decision to increase those reserves seem appropriate and prudent.
Ian Gutterman - Adage Capital Management, L.P.
Got it. And then I think the last stuff I have was the 1 1 renewals you gave gross premium in the release. I assume net premium is a further decline from gross, given the increased retro volume?
Edward J. Noonan
Increased retro volume, about the same dollars as last year. So if you give me 1 second, I'll give you maybe a more precise view that doesn't start to [indiscernible] relatively online the big deal we bought last year versus this year.
Jeffrey D. Sangster
I think in terms of premium, obviously, the reduction in gross is going to flow through the net, and then the delta obviously is what happened on the retro.
Edward J. Noonan
The other thing we did, last year, we had to purchase retro and it would show up I think in the second quarter, it was more of a midyear purchase. We've moved that up to January 1 this year. And so that will have a bigger impact on the 1 1 net and will actually be offsetting the, I think, the second quarter net.
Ian Gutterman - Adage Capital Management, L.P.
Okay, because where I was going with this, I was a little confused on the answer to Brian's question on PMLs. I would have thought if you cut back exposure some and you bought more retro that the 1 and 100 should've come down as well, maybe not as much as the 1 and 20, but I was surprised that was stable.
Jeffrey D. Sangster
Yes. So again, we shifted our book up the curve, and then there's also the impact of the Montana bond, which was impacting kind of at the higher end of the curve, the 100 and the ags, but wasn't particularly efficient. So we have that rolling off, which is offsetting the higher retro purchase.
Ian Gutterman - Adage Capital Management, L.P.
Okay. And does that ag retro, is that a worldwide or are there any parts of the world excluded or potential events included?
Edward J. Noonan
Worldwide.
Operator
We have no further questions at this time. With that, I turn the call back over to Ed Noonan.
Edward J. Noonan
Thank you very much, Ruby. And I appreciate you taking the time to join us today and you interest, and look forward to catching up again in a few months' time. Thank you.
Operator
Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.
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