Good morning, everyone. I'm Jay Gelb from Barclays. I'm the U.S. Insurance Equity Analyst. Very pleased to have with us today Arch Capital. The timing of this fireside chat, I think, is really important since Arch just announced its largest acquisition ever of AIG's mortgage insurance business for over $3 billion. We have with us today from Arch Capital, to my left, Mark Lyons. Mark is Executive VP and CFO of Arch Capital, along with David McElroy, who is CEO of Arch's primary insurance business. Arch is a leading specialty property casualty insurer and reinsurer with one of the best underwriting track records in the industry. As I just mentioned, in August the company announced the acquisition of AIG's mortgage insurance business for over $3 billion, which will be Arch's largest deal ever.
Mark joined Arch in 2002 and has served in executive capacities in addition to CFO, including head of Arch's worldwide commercial insurance operation. Prior to joining Arch, Mark held executive positions at Zurich, Berkshire Hathaway, and AIG. David McElroy has run Arch's worldwide insurance business since 2012.
Thank you for that gift.
He joined Arch in 2009 and previously held executive underwriting positions at The Hartford, Reliance National, and Chubb. Mark and David, thanks very much for joining us today.
Thanks for having us.
Let's start off with the big picture in property casualty, and then we'll discuss the mortgage insurance acquisition shortly. Could you describe Arch's positioning in the current property casualty insurance and reinsurance environment?
You know you're going to get the UGC question, so I'll do that.
Yeah. It's a lateral.
Thank you, Jay. The P&C market, the way we look at it, is one you have to navigate according to sticking your finger up and trying to figure out what's going on. The beauty is, we come at this from the standpoint of we had two legs of the stool. Then we added a third leg. The two legs of the stool were fit with the idea of how you navigate a soft market, a hard market, a transactional market. Then the beauty of the mortgage business came in to create that third leg of the stool. Even when I first got here, the two legs of the stool mattered because reinsurance and insurance are compatible and diversifying assets that you can play in. It's hard to do it when you're building one or the other on the fly.
What Arch did early is obviously they leveraged the asset of the reinsurance side. The reinsurance side is always going to be more nimble. Okay? Our view is nimble and contrarian. Okay? They can play the market tighter than the insurance market. Okay? They can be in and out. They have annual treaties. They can see the world. They're almost like a global macro fund, is my one way without being able to short the end. They can actually see the world and play in different sectors that they see asymmetric pricing and terms and conditions. It's very different for the insurance operation. In the insurance operation, you have to commit to the business. You have to commit with the idea of being long-term players. Then you have to think about the business the way you would set up barriers to entry.
If you look at our reinsurance operation, Mark will probably add some color, it is absolutely a special asset that can actually cycle manage more aggressively than we can on the insurance operation. Meanwhile, we believe fundamentally we can cycle manage on the insurance operation. They can be in and out of markets. They can be in and out of clients. They can be in and out of lines of business. They can look at the geography differently than the insurance company can because they can go worldwide when we might have to put down bodies and infrastructure. If you think of this as a complementary asset and an asset fit, the insurance operation benefits from the reinsurance operation. The reinsurance operation benefits from the insurance operation.
If you look at the construct of what has happened in reinsurance as property cat has become more price sensitive, arguably a bad trade, okay, our reinsurance operation has moved into specialty lines. Reputationally, they can do that. Whether it's motor in the U.K. or a property fac U.S. operation, which is equivalent to the U.S., whether it's surety and trade credit in the U.K., their ability is to transact and do LPTs. They're our go-anywhere fund. They're our macro fund without being able to short the end. That's a very important point in terms of how we manage this, what we call the asset, before we talk about the insurance company. The insurance company is you can't be in and out of the business. We've been very clear about that.
You can't just say, "I'm in excess casualty," and then leave it and think you're going to get back in. You have to pick businesses that matter, that are long-term in nature. They may not create the 25% ROE or create volatility around that, but they're very important to the ballast and the defendability of our company and allows the rest of the company to look at other opportunities and basically add, we'll call alpha on the side of it, but that's a very important piece. Meanwhile, and I say this, when we chose businesses, it was very much an Arch decision back in 2003. Very much antithetical to what a Bermuda company would do, is they build out primary businesses that you would not intuitively build out to go compete with primary insurance companies that I won't name.
Large account casualty business, loss sensitive business, construction, group captive business, doing a surety business. Every Bermuda company wouldn't have thought of doing that. We invested in that in the 2003, 2004, 2005 years to create an asset, a defendable asset, a supportable asset that actually is the ballast and that you think of in terms of, I need to count on this every year, and then I can do and work the other assets that I have inside this company. The beauty of the reinsurance side is we can do LPTs. We can manage capital. We can do a niche deal, I think is in the public domain. We can look at those things, and I believe we could do them if we were a standalone public company.
It's definitely more valued if we have the ballast of the $3 billion gross written premium insurance company with the assets that we have there and the businesses we have there. To make a long story longer, even when we look at the insurance company, we look at it as defendable assets, supportable assets, ones that you can't just readily jump into. We also look at cycle-managed assets. We look at our entire portfolio almost as an asset allocation fund ourselves, depending on the market. We're going to go aggressive when the market's hard in some of our market cycle businesses. Excess D&O, excess professional liability, excess casualty, the London market with all its syndicated first-party business.
The strength of Arch on the primary insurance side is the fact that we have businesses that are not easily attacked, that you have to build infrastructure and technology and services and admitted paper and regulatory. For us, that's 75% of our primary business, okay? You have to be egoless. You know that that's the ROE that's not going to be 20%, but we expect it to be 10%-11% if we do it right. It's not a sale by capital coming in aggressively. Once you build it, you build stickiness and you build a relationship that actually is generational in nature. At the same time, you also know that you have your accordion is that you have other businesses that if a hard market hits, you can ladder that thing up and it will change the weighting inside your portfolio.
Let me just add a little bit in. What Dave said, cycle manage, generally means high capacity businesses become commodity products over time, especially as you go up the tower. I guess two points to add. It's applicable to insurance and reinsurance. One is you got to make calls on that business before it's obvious that you should make that call. They're longer tailed. You can't wait for losses to emerge to realize whether you made money or not. If you do, you've renewed it for six years and you're a tombstone. You got to have a lot of mechanisms, a lot of triangulation and antenna out there to make those calls before it's obvious to do so, number one.
Number two is you can't just rely on reinsurance to do that and keep your market presence 100% or grow in a soft market and try to ship it out the back door. That's one, not a long-term sustainable strategy because you got to keep your underwriting strong on the growth side. We tend to view it as a combination that you need to make demonstrable action on the front end and utilize it where you can on the back end.
Let's turn the discussion to the mortgage insurance transaction. What drove Arch's decision to acquire the mortgage insurance business from AIG for over $3 billion rather than the focus on organic growth in this business, which it had been building over the past few years?
Well, good question, Jay. We have been building market share, as you know. For most of you in the audience have more of a PC slant to your background. The way market share is viewed in the mortgage space, it's more akin to, I call it the thinnest layer of onion skin on the ball. It's the most recent things that you put on the books. These are longer tail lines. Think of property casualty if everything was a seven or a 10-year policy and your market share was based on what you wrote this year. Wouldn't tell you much, right? We are making good headway on that onion skin layer, but this allows us to have the whole ball, not just the layer on the outside of the ball.
We had a lot more exposure from a very well-thinking strategy underlying UGC and how they approach the market.
How much earnings accretion is expected to occur from the deal?
Well, we think it's going to be very accretive depending upon various metrics, and we've said some of those publicly. Our view of that really hasn't changed between, let's say, our earnings call and our special call versus now. As Dave said, it's the third leg of the stool, especially with its increasing import or proportional import to the book. We're looking for strong accretion very quickly after the transaction.
Excellent. One of the things that caught my eye on the transaction is the way it was funded. Arch is using a substantial portion of its on-balance sheet excess capital to fund the deal. Maybe it'd be helpful if you just kind of run through how the deal's being financed, and then taking that into account, how much of Arch's on-balance sheet excess capital, or essentially another way of asking it is, was essentially all of Arch's excess capital deployed in this deal?
Well, the structure for the consideration that we have is still, because market conditions change, is still a little bit moving on that. Some of those proportions will change. Jay, I think you know us, we're never going to deplete our excess capital. There's too many unpredictable things that can come out of left field on you. That'll never happen to us. We are utilizing a combination of some levels of excess capital in debt markets and preferred markets to accomplish it.
Right. The AIG essentially buying the common of Arch to partially fund the deal. It looks like AIG will own around 10% of Arch on a go-forward basis once those convert to common.
It could be less than that because it's subject to a collar.
There's a ±7.5% collar on it, and the market reacted very well to the announcement. We're north of the collar, which means we would issue the fewest number of shares, so that percentage of ownership would actually drop.
One element of the transaction in that prior to Arch buying the business of United Guaranty, AIG internally reinsured about half the UGC business to provide capital support. How does that kind of work going forward, and what element of valuation should that take into account for the transaction?
Okay. That's an interesting point. That was a preexisting quota share. Member companies of AIG, I think it was three member companies of AIG, provided support to UGC, member companies, to the tune of a 50% quota share for what they say in the mortgage industry is book years 2014, 2015, and 2016, we would say underwriting years. Still policies effective during that period of time. That will remain in force effectively on a runoff basis. Assuming the transaction closes at the end of the year, which is what we're shooting for, that would be all policies effective 1/1/2017 and subsequent. It's 100% to Arch because that got canceled on a runoff basis. What would've been their net, plus the 50% ceded, is the 100% that we would write ourselves.
The 50% on underwriting years 2014, 2015, and 2016 stay in force with AIG, and I think that's probably the value proposition you're talking about, and that is a value to AIG. It's one of those things where we're very happy with the net assets we're taking, and this allows them to continue to enjoy some of the earnings coming from those profitable underwriting years. I think it's one of the few win-wins you're going to see on a transaction like this.
That's right. How comfortable is Arch having half and possibly more of its pro forma earnings from mortgage insurance, whereas previously, as you mentioned at the outset, a lot of people in this room have approached Arch from an investor and analyst standpoint as triple A P&C?
Totally comfortable. Totally comfortable. For following reasons. That mix is going to change over time, and I would say it is more likely than not, sounding like an accountant now, more likely than not that they are going to, over time, be pretty countercyclical to each other. One is a macroeconomically based and the other has its own PC characteristics, as you know, by line insurance and reinsurance. When MI is great, PC tends to be under increasing pressure. When PC is great, mortgage will tend to, its margins will be under stress, and there will be natural offsets to each other. I think it increases the stability of our earnings, quite frankly. I view that as a temporary issue where it is 50%, and that could easily change. Look back at our history when property cat earnings may have been disproportionately high. What did we do?
We chopped that back 75% because the risk/reward trade-off we did not think makes any sense. Our way we manage the cycle, the way we evaluate things is going to be identical in mortgage as it is in PC.
Okay. If I think out for the next couple of years in a potentially continued softening property casualty environment where it probably ultimately leads to less earnings in the core commercial insurance or reinsurance business compared to being in a very profitable part of the cycle for MI, is it fair to say that the majority of Arch's earnings could be from MI over the next couple of years?
Well, I think, Dave alluded to a couple things that can ameliorate that trend. Everything else being equal, yeah, that could go north of 50, which I think is already your question. He mentioned on the reinsurance side first.
Yeah
There's a lot of specialized transactions. If you talk to Nicolas Papadopoulo, who, like Dave, runs the reinsurance side, 50% of this flow is non-traditional because of our reputation, because of our financial strength and so forth. We're seeing things that he would see, for example. There's a lot of opportunity on left field originations. That is not standard flow business. Nicolas does a good job of managing that. Dave already talked about the cycle managing on the insurance side, and when it's more difficult in reinsurance, it was never in equilibrium, it makes sense to purchase more or purchase more smartly on the insurance side and leveraging that. The combination of those two things, I think will stem the tide of that shift to be too much more than the 50%.
Okay, that's helpful. When we look at the pro forma market share of new mortgage insurance written, combining what Arch already had on the books and then adding UGC, I think you discussed on the call that it could decline from that high 20% range. Why is that, and where do you think it could end up?
Well, some of it's inside your control, some of it's not. On the ones outside of your control, that's individual bank and loan officer decisions, depending on whether it's centralized or distributed within the banks themselves. As an example, for bank X, if we had a 3% market share and UGC had a 4% market share, that's probably going to go through as seven. If we had 12% and UGC had 25%, 37% is not going to go through. There's going to be a natural chop back on that. You're going to see some of that. I think there's also going to be some difference in how we see the relative adequacy of monthly versus singles of business, and therefore there could be a shift in that makeup over time as well.
All right. Okay. Let's turn back to commercial insurance, reinsurance. It's a pretty challenging environment. What's your outlook over the next couple of years broadly on the pricing side? Why don't we start first with reinsurance, given that January renewals are around the corner, and then we can go back to David on primary.
Do you mind if I kick it to him first?
Sure.
Yeah. No, it's a great question, Jay. Here's the reality. We're in a completely different market than we were a decade ago, okay? Whether it's the data, the understanding of risk, the granularity, okay? You can't look back and say, "That's the future." I'll touch reinsurance, and Mark hit it earlier. Half of our book there is in, we'll call it unique esoteric lines, transactional lines that they have a reputation of being able to find and also a reputation of people calling them on. Whether it's a motor XOL or some A&H and credit and surety in the U.K., they're a go-anywhere fund. They can do things, and that's a great market to be in. That's a market that you have to be in when you're feeling the pressure of what would be. I always come back to it.
We had four years of rate increases in the U.S., okay, that gave us some, gave everybody confidence, gave everybody a view that they're fine. Now it turns back. This is an important point. Any insurance company who sits up here and says, "Here's my market," without saying that there's 20 caveats to 20 sub-markets, is lying to you. Every market is a unique market today. First party is first party, okay? First party in the U.S. versus the U.K., first party around the world, first party in marine and energy, first party in E&S property versus global property. They're such distinct markets. To look at the future is to look at the future, if you broad base it, you're going to get in trouble.
The companies that are going to win, the companies that we believe will win, will actually have data and understanding about their own books and be able to parse them. You're not doing med mal in the wrong jurisdiction thinking that you're getting rate increase when in fact it's not enough, or D&O or casualty. Our thesis is a very strong thesis, is the closer you are to the client, the closer you are to the business, the less commoditized you are, i.e., excess and first-party business, the more you have an asset that you can actually work.
Right. Barring any big shift in catastrophes, reserves, exit of certain companies, is it fair to say that primary pricing will probably still be down low to mid single digits over the next couple of years?
It's a great question, Jay, because here's the thing. We just had a three-year run of rate over trend, okay? This is where we wake up in the morning and we're nervous. We had three years of rate over trend, and in theory, trend has been a deflationary trend, which is unusual, and most of our key actuaries will never give that, and they're still testing that. We have that. Nobody believes it. The good companies are looking at that going, "I don't trust it." The next couple of years is when that flips, and it could flip tomorrow, is you have a massive problem. You have a deficiency in not only your reserves that are coming up for a judicial ruling or a claim resolution. You've missed that, and you have to think that way.
In our case, we believe SME, small account business, low volatility business, you're going to be less subject to the inflationary pressures that might come with trend going high and to the right. You need to be in businesses that are less subject to that, okay? Some of those are controllable businesses we believe in. You might catch a little bit of inflation in workers' comp, but if the client's sharing in that with you, the inflationary piece is less suspect. No one should be, and we're wildly concerned about it, is no one should think that the inflationary trends that have existed over the last five years coming off the global recession will exist in the next couple of years. We are certainly architecting our portfolio around that and anticipating that that's an outlier.
That could happen, and it happens on the portfolio, not on the business you're running at that moment.
What's your thoughts on the reinsurance side, Mark?
Some of it's clearly leverageable from Dave, since you have to sit on top of a primary operation. It's competitive, it's tough. Everybody focuses on property cat, gets the headlines, even though there's more alternative capital in the market, it's still the smallest % of premium, although it has been thick historically in the income it produces. That's under stress. That's when you make some of the market cycle management decisions like we've made. Interestingly, everybody likes to talk about price and what Dave's group leverages and what reinsurers have to be aware of. It's not just the increased ceding commissions, which are great, and you want to take them and bring them down to the bottom line. It's the manner in which. It's not just an hours clause in property cat.
It's taking businesses that had been disparate businesses before, let's say, tech risk businesses with property, with E&S casualty business, different distribution channels, combining those, when before they used to be separate towers, adding Canada into it, adding the U.K. into it, which was an XOL market. Now they get quota share capacity. You're broadening what's subject, and you're leveraging increasingly with the same ceding commission from year one to year two, a higher proportion of business and ceding attritional loss, not just excess loss. There's a lot of things we leverage as buyer that reinsurers as provider have to be on guard against.
Okay. What does that all mean from a kind of ongoing return on equity standpoint for Arch, inclusive of MI?
Well, I think what it's going to show is stabilization for the insurance group, the reinsurance group will be more dependent on those one-off transactional type opportunities that Dave alluded to. This is the time to play big-time defense, go after Gold Glove awards. You're not going to drive a lot of doubles, triples, and home runs here. This is where singles matter, and this is where Gold Gloves matter, and that's the reinsurance group earns their stripes.
What's a fair expectation for ROE over the cycle?
ROE over the cycle, because of our management of the cycle and the fact that our third leg is now going to be increasingly large, we don't see that dropping. We've been talking about 10 to 12-ish in totality. Yes, there's going to be more pressure for reinsurance than insurance. In fact, I would rank reinsurance, insurance, mortgage. As you change those proportions, you can stabilize the aggregate return. That's what we'll be doing.
Great. Excellent. Reserve releases, they've been significant and persistent. Do you see anything changing that trend?
Well.
That's forward-looking.
Yeah. We're data-driven with a lot of judgment around it. It's the same chief actuaries that have been here since as long as I've been here, there's no change in procedure. We're just going to continue to go what the emergence tells us. No, I'm not going to jump forward on that one.
I think the key point there, honestly, Jay, is that even though inflation trends have been benign over the last couple of years, we're probably not factoring them into some of our views of what might be ultimate development. Okay. It has been. It's a unique situation, I think when we're doing our plans and we're looking at our history, we're probably not incorporating a, certainly never a negative trend, inflation trend, claims trend, into some of our expected losses in our development.
There's probably still some conservatism baked into initial accident year picks, as well as on the seasoning business.
I would say let's just look at our-
It's hard to look at.
Philosophy hasn't changed.
It's hard to look at 14 years and say it's.
Yeah. The same philosophy being applied now as then, and our history shows good results.
Yeah. Excellent. All right. Let's go to the audience response system. All right, the first question for the audience, and then I'll ask Arch's management to comment is, if you currently don't own shares of Arch or underweight the stock, what would cause you to change your mind? Let me start the clock.
What if everyone has their stock?
A couple seconds left to key in here. Investors are saying they'd like to see a lower valuation. That's a high-class problem, right? Can't really control that. Second highest one, seeing a third saying greater clarity on the upside potential from the acquisition of the mortgage insurance unit. That seems like a fair statement.
Yeah, I hit the heart of some of your questions here, and it's how we view it, and I'll give you a little more clarity. We view that business as mid-double digit returns. How we navigate that is that it's going to be the same leverage we've done in the past on the PC side or a mixture of it.
Mid-double digit meaning?
Mid-teens.
Mid-teens. Okay.
We've got the combination of multi-platforms, remember. The UGC is an expansion of the U.S. primary. On top, we've got our mortgage reinsurance that we do internationally, and we have our GSE credit risk transactions.
That's helpful. Next question, please. Arch's return on equity was 9.3% in the first half of 2016. Investors' return on equity expectation for Arch over the next several years, inclusive of the announced MI transaction is? We've got a range of values here. Probably let that one expire. Investors are thinking. Roughly half are saying between 9%-11%, and a third saying 11%-13%. That's generally at the higher end, kind of within the range you talked about.
Yes. Although here's one thing I'd ask the group to consider. Our 9.3% is mostly due not to a bad numerator, but to a thick denominator, because some of the excess capital that you alluded to. What are we doing? We're taking a lot of that excess capital that has treasuries and other kinds of returns associated with it, and we're putting it to work. We're putting it to work in mid-teens return businesses. Even though we're financing it, take just the debt side. You look at 10 and 30-year debt, it's not the total coupon, it's the spread over because it's above risk-free, and that's 185-210 bps. Then if it's tax affected, that's about as cheap financing as you're ever going to have to put to work mid-teens ROE. That has to weighted averages.
That has to result in upward movement on the ROE.
Next question, please. Investors' view of Arch's acquisition of AIG's mortgage insurance business is? Let's see how investors rate it.
If it's high on one of those, I'll have to resign immediately.
The 73% saying favorable and another 15% saying highly favorable.
That's good to hear.
Clearly the market thinks very strongly of the transaction. Next question, please. I put a lot of text on this one. Should Arch's PE be closer to that of the other top tier P&C insurers? I'm thinking Chubb and Travelers here at around 12 times earnings, or to the monoline mortgage insurers, which currently trade at around eight times earnings. At this point, investors are saying, two-thirds saying Arch should be valued as a hybrid insurer between P&C and mortgage insurer, and one quarter saying Arch should be valued as a top tier P&C insurer, not as a mortgage insurer. Hmm. Okay.
If number four was two-thirds, I would've thought instead, because that's not sure that you were asking about the presidential election instead.
What do you think about that in terms of a valuation?
Well, you know me. I always think we're undervalued. I might be slightly biased. We're trading at about 155, 156 a book. Difference between our book value and our tangible book value, it's like $0.75 per share. It's not material at this point. I think, my guess is that's why the audience felt that way as well, is that GAAP accounting does not properly recognize true embedded value in mortgage assets. The market cap that we've increased, that we've enjoyed since then, I think is a partial recognition of that. I think it's not just us. I think in many, many mortgage insurers that is not fully recognized or appreciated.
Hmm. Interesting point. Do we have any more ARS? Let's go to the audience for questions. Have a couple minutes left. First question right up here, please.
Could you just go through the ROE again? I think you said mid-teens for mortgage, 10%-12% over the cycle for primary, reinsurance, what do you expect? I think you said 10%-12% for the entire company. Can you help me square them?
Sure. Well, first off, one, that is short term versus we expect 15% over the long term, aggregately across all the businesses in the aggregate. Which means in softer markets, it goes on the south side, and hard markets, it goes on the north side. That's why you got to play the market cycle management game. If you're market share oriented, you give it all back. If you drop and change your mix, you hold onto that, and we always like to joke that the insurance industry does a great job of capital management. We just return it to the wrong people through a 200 combined ratio or something like that. You just have to be conscious of that. Overall, over the long term, it's 15%.
Over the shorter term outlook, it's 10%-12%, and the relative gradation of that is reinsurance insurance mortgage, that weight to that.
I wonder if you can comment. What is your outlook on mortgage insurance pricing after your deal, and what do you expect to be the competitive response from FHA and the other players?
Competitive responses are always hard to forecast, especially when there's a governmental aspect to it. In terms of pricing, that will shake itself out. We and UGC both have risk-based pricing approaches.
That actually, I believe, is what's really accounted for the traction that we got on the onion skin layer of recent market share in that. I think in a composite basis, so it continues to be thoughtful, it will continue to be more targeted of price to risk, and that will be our forte. That's what we do on the specialty side. We have that thinking, and that will continue in the mortgage section as well.
Any final questions? One right up here, please.
In the last cycle of mortgage, it got really bad. What gives you confidence that the next cycle will be different?
It probably won't be different, actually. In fact, given that the GSEs have actually made more certainty into their product and therefore less differentiated, so rescissions and denials. That ability to get out of claims and favorably impact your loss ratio is less there for the next cycle than it was on the bad cycle. Let's also step back from that. In a diversified portfolio, you're going to have certain things that perform well, certain things that don't perform well, across all the businesses. When I look at the mortgage space, and it was generally three to four underwriting years or book years that were disasters if you look at them in the classic triangle sense. Depending upon your mix of monthly to singles, it's got a different view than when you're looking at the PC side.
On the PC side, you're adding occurrence-based businesses that tends to increase. Claims-made businesses can be a little different. What happens is it generally will deteriorate, and then it gets better because you continue to get the monthly stream in. If you have a higher proportion of monthlies, your loss ratio will actually go down. In the lots of book of business that I've seen in that, it was bad, like a 185 or something like that loss ratio. Let me tell you, in the PC space, there's 300s, 400s, and 500s in pockets of business. Excess casualty business hits 400+ ratios. That's a longer duration business than mortgage business. We've managed that pretty effectively. That's the first thing. Second thing is there's a lot more tools that's out there in the marketplace to help manage risk than was there for the last cycle.
First off, you've got a much broader spectrum of diversified property casualty people playing in the space. For quota shares, not just agg excesses and things of that nature. You have a lot more capital markets execution than ever existed back then, and some of that is competitive between capital markets and classic reinsurers. There's sidecar opportunities that we've already employed through Flatiron Re when we did a $900 million one back in 2006-ish area, I think. The fact that there's always people knocking on our door wanting to put capitals to work for us and with us. We think there's a whole myriad of front-end and back-end tools that are going to make the complexion different.
Is it safe to say the lever-
Actually, I'm sorry, David, we're out of time.
Got it.
We're going to continue the discussion in Liberty three for the breakout, if people want to join us there. Please join me in thanking Dave McElroy and-
Thank you
-Mark Lyons
Thank you