Good day, everyone. Welcome to the first quarter 2013 earnings call of Everest Re Group, Ltd. Today's conference is being recorded. At this time, for opening remarks and introductions, I'd like to turn the conference over to Ms. Beth Farrell, Vice President of Investor Relations. Please go ahead.
Thank you, Tim. Good morning and welcome to Everest Re Group's first quarter 2013 earnings conference call. On the call with me today are Joe Taranto, the company's Chairman and Chief Executive Officer, Dom Addesso, our President, and Craig Howie, our Chief Financial Officer. Before we begin, I will preface our comments by noting that our SEC filings include extensive disclosures with respect to forward-looking statements. In that regard, I note that statements made during today's call, which are forward-looking in nature, such as statements about projections, estimates, expectations, and the like, are subject to various risks. As you know, actual results could differ materially from current projections or expectations. Our SEC filings have a full listing of the risks that investors should consider in connection with such statements. Let me turn the call over to Joe.
Thanks, Beth. Good morning. In the first quarter, we had 13% growth in premium, 25% growth in operating earnings, and an annualized net income return on equity of 25%. I'm extremely pleased with how our underwriting portfolio is positioned and how our investment portfolio is positioned. We are finding growth opportunities in both our reinsurance and insurance operations. I expect strong top-line growth to continue this year. Dom will provide more detail on this shortly. During the quarter, we repurchased $239 million of our shares. After the quarter, we repurchased another $11 million of our shares for a grand total of $250 million. Even though we bought back a quarter of a billion dollars worth of stock and paid $24 million in dividends, our earnings powered an increase in shareholders' equity from $6.7 billion to $6.8 billion.
Recently, we notified note holders of our 6.2% junior subordinated debt securities that we will be calling the bonds. Accordingly, we expect to redeem $320 million of debt in late May. We are presently investing new money at slightly over 2% in corporate bonds. We expect to have roughly a 4% benefit on these funds on an annualized basis going forward. That means we expect to increase pre-tax earnings by approximately $13 million annualized going forward from June. Craig will later provide additional detail on this transaction. Repurchasing a quarter of a billion dollars of stock and redeeming $320 million of our bonds underscores the strength of our company and our confidence in our future. Frankly, we've never been stronger, and we've never been better positioned. I am very proud that Everest has increased shareholder value for over 17 years at a compounded rate of 13%.
I am pleased that we beat our historical average last year and grew shareholder value at 18%. I am pleased that we beat our historical average again in the first quarter of this year as we grew shareholder value at an annualized rate of 18%. We continue to see opportunities and are very excited about our future prospects. Dom?
Thanks, Joe, and good morning. The first quarter results reflect an improving market in certain areas, a lack of any major cats, and most importantly, a number of initiatives which are beginning to yield benefits. Starting with reinsurance, the quarter produced a $210 million underwriting gain for a 76.4% combined ratio. Each of our major segments within reinsurance experienced combined ratios less than 80%. The quarterly trend in the attritional combined ratios has been improving as a result of the shift from pro-rata to excess. This has not only had a dramatic impact on the loss ratio, but also the expense ratio. In addition, we have capitalized on favorable market conditions in certain regions and introduced new product offerings in both existing and new classes of business, which have increased our writings and resulted in greater diversification, both in product and geography.
These factors were most evident in the U.S. reinsurance segment, where premium growth was close to 18%. In addition to new business opportunities, this segment benefited from rate increases on existing business, with noted improvements in the casualty classes, as well as those accounts that were affected by Sandy losses. In the international and Bermuda segments, growth in total premiums was slightly in excess of 6%. Here, we also experienced some new business growth, which accounts for most of the increase. Rate activity varied depending on class and geography, which overall can be characterized as flattish in terms of its impact. Looking forward into the second quarter for all reinsurance segments, we expect casualty rates to continue to improve. This favorable trend in overall casualty rates is also a positive for our insurance operations, as I will discuss shortly.
Rate increases were also a factor for the marine book, which has grown in excess of 28% for the quarter due to both rate and new business. Property continues to be mixed depending on geography. The loss-affected accounts in the Northeast U.S. have seen increases, while Asia and Europe have been relatively flat. Nevertheless, we continue to deploy new capacity in product and layers which provide returns in excess of our hurdle rates. Our portfolio continues to be well-positioned. Actions taken over the last few quarters have resulted in a well-balanced and diversified book, which has steadily improved the profitability. This diversification also means that the portfolio is better positioned to absorb cat events. Turning to the insurance segment also reveals an improved result with a combined ratio of below 100.
This includes a 136% combined ratio from the crop insurance book, which was due to the seasonality of the premium on that business and the impact on the expense ratio, as well as adverse development from last year's drought conditions. When looking at the insurance segment without the crop business, it results in a 96% combined ratio. This highlights the underlying improvement expected as a result of continued double-digit rate increases in workers' comp and general casualty, in addition to the elimination of certain program business. These rate increases, along with growth, particularly in the specialty classes as a result of the new initiatives referenced last quarter, should continue to move the insurance operations forward in a positive direction. In addition, the previously announced transition regarding our non-standard auto business will allow that business to grow but at improving margins.
Primary medical stop-loss product continues to yield over 12 points of margin. Our U.S. professional liability book is at nine points of underwriting profit. In both cases, pricing is generally flat, near-term growth is expected to be purposefully slow. Primary property rates continue to show a sign of firming, selective growth is expected. As we move into the remainder of the year, the crop writings will emerge. We've had a successful renewal season as new territories were opened, which will result in growth in gross premiums year-over-year. The net account will become much more significant to the segment with the elimination of the quota share in force last year.
The combination of crop, A&H, DIC, specialty casualty and property, professional liability, non-standard auto and California workers' comp, all with continuing or improving fundamentals, should translate into a positive trend for the combined ratio below the previously mentioned 96%. I will conclude by touching on investment income, the other major component of our operating results. For the quarter, investment income was, as anticipated, down over the prior year. While this was due to lower reinvestment rates, it was better than forecast due to the strategies deployed over the last several quarters. Diversification into high-yield bonds and dividend-paying stocks has helped to stall the decline. Our limited partnerships continue to perform well. The increased allocation to equities has also been a benefit to net income this quarter, as realized capital gains were $127 million.
These investment and underwriting strategies that have been emerging over the last several quarters have produced record earnings for the quarter. The headwinds of investment rates or reinsurance or insurance rates or whatever else the markets can throw at us will always be a factor in varying degrees and at different times. Nevertheless, we have positioned our resources and our portfolio to be able to respond effectively to the challenges and to take full advantage of the opportunities that the markets present to us. These are the benefits of a well-diversified and global platform. Thank you. Now I will turn it over to Craig for further details on the financials.
Thank you, Tim, and good morning, everyone. We are pleased to report that Everest had a record quarter of earnings with after-tax operating income of $301.1 million, or $5.88 per diluted common share for the first quarter of 2013. This is a 25% increase over after-tax operating income of $239.9 million or $4.48 per share for the first quarter of 2012. Net income for the first quarter was $384.3 million, or $7.50 per diluted share, compared to $304.7 million or $5.68 per share in 2012. Net income includes realized capital gains and represents an annualized return on equity of 25%. These results were driven by a $100 million increase in the underwriting result, offset by higher income taxes and slightly lower net investment income compared to the first quarter of 2012.
The results reflect the continued improvement in the overall current year attritional combined ratio, which has declined more than five points, from 86.4% to 80.7%. This measure excludes the impact of catastrophes, reinstatement premiums, and prior period loss development. The total reinsurance attritional combined ratio was 76.8%, compared to 83.2% in the prior year. The insurance segment attritional combined ratio was 98.5%, compared to 101.2% in the prior year. However, eliminating the effects of the primary crop book, this ratio would have been 95.9%, compared to 98.2% in the prior year. All segments reported underwriting gains for the quarter, and all segments reported improved underwriting results compared to last year. Total reinsurance reported an underwriting gain of $210 million for the quarter, compared to a $112 million underwriting gain last year. The first quarter of 2012 was impacted by $30 million of catastrophe losses.
The insurance segment reported an underwriting gain of $193,000 for the quarter, compared to an underwriting loss of $2 million last year. These results reflect a crop loss of $7 million for the quarter, primarily due to the seasonality of crop premiums, but also including a $3 million true-up from the 2012 crop year. The overall underwriting gain for the group was $210 million for the quarter, compared to an underwriting gain of $110 million in the same period last year. Our reported combined ratio was 80.7% for the quarter, compared to 89.0% in 2012. The commission ratio of 21.4% for the quarter is down 2.4 points compared to the prior year. This lower ratio reflects the shift in reinsurance from pro-rata to excess of loss contracts, which generally carry a lower commission. It also reflects the shift away from program business to direct business in the insurance segment.
Our low expense ratio of 4.9% continues to be a major competitive advantage. A recent industry analysis showed that we had the lowest overhead expense ratio in the industry for 2012, a full two-point advantage. On reserves, our overall quarterly internal reserving metrics continue to be favorable. For investments, pre-tax investment income was $146 million for the quarter on our $16.6 billion investment portfolio. Investment income declined $7 million from one year ago. This decrease was primarily driven by declining reinvestment rates, partially offset by higher limited partnership income for the quarter. Despite the declining rates, our investment portfolio continues to perform well. The pre-tax yield on the overall portfolio was 3.7%, with a duration of just over three years. The quarter reflected $83 million of net after-tax realized capital gains, compared to $65 million last year. These gains are mainly attributable to fair value adjustments on the equity portfolio.
On income taxes, the 12.3% effective tax rate on operating income is in line with our expected rate for the year. Also recall that 2012 income tax expense benefited from favorable one-time adjustments. Strong cash flow continues, with operating cash flows of $226 million for the quarter, compared to $166 million in 2012. This is despite the high level of catastrophe loss payments over the last two years. Turning to capital management. As Joe mentioned, we have decided to call our 6.2% junior subordinated debt that was due in 2034. The note holders have been notified, and the redemption will occur on May 24th. This will save about $20 million of annualized interest expense, and we will use cash that would have been invested at about 2%. The net savings of about 4% will increase annualized earnings by approximately $13 million, beginning in June.
Shareholders' equity increased to $6.8 billion this year, up $83 million from $6.7 billion at year-end 2012. This is after taking into account capital returned for the $239 million of stock repurchases and the $24 million of dividends paid in the first quarter of 2013. Book value per share increased 4% to $136.43 from $130.96 at year-end 2012.
Our strong capital position leaves us with the capacity to maximize our business opportunities as well as continue share repurchases. Thank you. Now I'll turn it back to Beth for Q&A.
Tim, we're ready to take questions.
At this time, if you'd like to ask a question, please press star then the number one on your telephone keypad. Once again, that's star one. We'll pause for a moment to assemble the queue. We'll take our first question from Amit Kumar with Macquarie Capital.
Thanks, good morning, and congrats on a strong quarter. I guess two or three questions. My first question relates to the upcoming renewals. We've heard a lot about the third-party capital entering this marketplace, some other companies have alluded to a tough renewal at seven one. I was curious, what your thoughts are on that, I guess, in conjunction with Mount Logan Re. Thanks.
Well, let me start with at least the six ones that are coming up, which I guess are more the Florida renewals.
Yeah.
First of all, looking to the Florida market, I do expect more demand, as you noted, there probably will be more supply as well. I won't predict how that collectively moves the entire market, overall, I still expect it to be quite a good market. I anticipate we will have a very good June 1st renewal, we'll be renewing business at healthy rates. We've concluded a few deals so far for the six one season, we're reasonably far along on a few others. What we've put to bed so far is at similar rates to last year. On top of that, underlying homeowner rates continue to improve, which will make quota share opportunities healthier, commercial property rates continue to improve, making for a better environment for our insurance operation, our property insurance operation in Florida, and our facultative reinsurance operation.
I expect XOL reinsurance to be well-rated as well. Going beyond that to seven one, again, it gets even a little fuzzier as you get into some of the international renewals. What we saw recently in April in Japan is that was a relatively flat-ish renewal. We'll see what happens when we get to July and beyond. I don't expect the world to change all that dramatically for cat business, for professional reinsurers.
Got it. The other question I had was on crop. Do you have the % breakdown of your crop book? I think in terms of what % is corn, what % is soybean, and what % is winter wheat. That would be very helpful.
Yeah. Our portfolio is about 40% corn, 25% wheat, 17% soy, and then remaining mixture between cotton and other grains and beans. Most of the wheat is fall crop, if that helps.
Yeah. I guess the final question related to that, the corn planting is meaningfully behind, I guess, the long-term trend, and it seems that the window is closing very quickly. I was curious if you had any thoughts on the corn planting and how that would play into the results going forward. Thanks.
I think last year, my recollection was that it was really a relatively early planting season. I think this year's planting is along the expected calendar. I'm not sure that we view it the same way as what you might be suggesting. Certainly, farmers need to get their crops in the ground before the middle of May. We still think that there's plenty of opportunity to do that. There's been some floodings in certain areas of the Midwest that might delay some of the plantings, but much of the flooding does not affect the farmlands. To the extent that those areas that we've designated as flood prone, we have the ability and have actually ceded those risks to the assigned risk pool.
Let me add to that really, it's early days for the crop business, but at this point, we have no reason to expect anything other than a normal season. Time will tell. We have no indication otherwise at this point.
I was just looking at a USDA report which shows that if you look at Illinois or Indiana, if planting was 50% last year, right now it's at 1%. You are saying that it should still be fine, even though-
Yes
the numbers tell another story. Okay.
Yes.
That's all I have. Thanks for all the answers.
Thank you.
We'll take our next question from Michael Nannizzi with Goldman Sachs.
Thank you. Just one question on the investment portfolio. Are you pulling down duration kind of in anticipation of the potential rise in interest rates, or is that something that you're not really kind of positioning for at this point?
We, as I made some reference to the investment strategies, really began with us several quarters ago, and we pulled down duration dramatically over the last several quarters. What we've done more recently has been relatively stable. Our duration is under three right now, and that hasn't moved much the last couple of quarters. We've been stable in that regard. We've done a lot of work in terms of moving that to where it is today over the last several quarters, which began, as I mentioned, a few quarters ago.
So I just-
Some of the thinking is to be protected in the event there is a big rise in interest rates.
Got it. I guess the question I would have is along those lines, and you mentioned calling some debt. You've got relatively high-interest debt, and you've got obviously low interest rates. How do you reconcile the decision to call those bonds instead of kind of replacing the very low leverage that you currently have?
Michael, this is Craig. There were many options that we evaluated when we went through this process, and frankly, all the options were good options for us. This was the most accretive to our earnings, especially since it's a risk-free return to us. Our capital position is strong enough to absorb this transaction, where we didn't have to replace it with other debt.
It really should have no impact on our share repurchases for the year.
Right. The savings from, just trying to make sure I understand, so calling the 6.2% debt would be more accretive to per-share earnings than reissuing and repurchasing $300 million in stock.
That's correct.
Okay. One question I had on the insurance book, I feel like, kind of going back, it seems like it's a book that has been in some transition, whether it's the crop book, the quota share program book, the rerating on the comp side. How should we think about this? I look at it and I'm not really sure the crop versus the non-crop, how big is it? What's the impact of this quota share program, and how should we think about this book going forward? I appreciate the commentary about the combined ratio drifting downward, but I don't have a good feel for what's in there and whether or not there are more potential changes to come other than opportunistic moves on the margin. Is the corpus now mostly in place?
Well, there are lots of moving pieces. You've got what will be in excess of $200 million of premium in crop for the year. Likewise, we'll have well in excess of $200 million for the California comp. Our primary medical stop-loss business is just under $100 million. We've got the non-standard auto business, which was at 30, is expected to grow to $80 million, and from there. It's pieces of that. There are elements that we expect to grow. We've got an excess casualty facility, we've got an environmental facility. We just formed a specialty insurance group, which I've mentioned in previous, I think in the last quarter, to focus on some unique classes of business and niche business. By the same token, the program business is coming down, moving more to a direct broker model.
All of those things are having a positive impact on our business. Also, our California DIC business has performed nicely, and we have a property E&S operation that could experience some growth in a strengthening property insurance market in particular.
Adding a little bit more to that. The crop business will probably be, roughly speaking, 25% of our business. As I said, we're expecting a normal year. A normal year means a very reasonable profit. Workers' comp is probably another 25% of our business, and rates continue to go up there quite nicely. Frankly, in the course of the last four years, we've achieved a compounded 60% of rates. You put those two together, which are trending nicely, and you're up to half of the book.
Right.
That, as Dom noted, you got professional liability making a portion, which is running very well, medical stop-loss making a portion, which is running very well. The non-standard auto portion, GL and property rates are going up, and that's a portion. That helps quantify it for you, but everything is moving in the right direction. Frankly, if you take out the blip from crop in this quarter, it's 96 when you put it all together, even this quarter. That's why we feel good about it.
Got it. You got about two and a half points of underlying combined ratio improvement ex crop in this segment year-over-year. As we look, you've got crop, which is anomalistic from rate environment. You've got workers' compensation, where it sounds like you're saying that rate is running at a healthy clip ahead of loss trend. Then if we were to look at the other 50% of book, how should we think about the migration there in terms of is there an amalgamated rate versus a loss trend where you are aiming or targeting for that we can think about as that book moves ahead? Thank you for all your answers.
Well, let me talk about the other 50%.
Okay.
I think I mentioned in my opening comments the margins that we're experiencing in our medical stop-loss book of business and the professional liability book. We're obviously pleased with those margins. As I said, rates appear to be flattish in that environment. We're not expecting huge amounts of growth, but certainly those two classes of business, if you will, are easily meeting our hurdle rates. Casualty rates for us are going up double-digit. Certainly, we would expect that trend to continue above loss trend. We'll expect to see growth in the casualty space in the primary market.
Great. I have one more. I'll just be quick. Thank you so much.
Okay, we'll go next to Greg Locraft with Morgan Stanley.
Great. Thanks, guys. Awesome quarter. Wanted to just follow up on your commentary that mid-year, or at least the last couple deals, were sort of renewing flat year-over-year. Can you be more specific in terms of what type of business this is? What layers? Is this Florida? Is it not Florida? Can you help us think about that? That's actually a lot better than what I was thinking.
What Joe was referencing in that comment was the six ones that we've already put to bed or about to put to bed in Florida. All right.
Yeah, we put to bed probably close to half of the premium that we've done on XOL business that we did last year. We've put that to bed this year and pretty flat rate versus rate. There's more to come. Some of this will take a couple of months, but that's what we've experienced so far.
Okay, great. Maybe same topic just on the mid-years and specifically Florida. What are you seeing on the unit side? It seems like there's some favorable trends from a depopulation perspective that might be materializing. Could you help us think about some of those?
Well, there are, Greg. I think that's when I was saying I expect demand to go up because you're right. Citizens is depoping, and that seems to be going to some of the smaller companies, more thinly capitalized, that are more in need of traditional reinsurance. That's why I kind of said demand is on the rise. At the same time, I do believe there is some supply on the rise in the sense that reinsurers like ourselves, surplus is building and there is some alternate capital coming in. I wasn't going to get into predicting when you put all that together, what it means in terms of rate for the industry. I really already know that we're going to have a good June 1st. I know enough information to see that will be the case.
Okay, great. Demand is up and then pricing is flat. Maybe jumping back to my last question-
Well, what we've done so far is flat. More to come.
Okay. Again, the flat you're mentioning is price. That's not just premiums that are flat.
No, rate relative to exposure.
Perfect.
I'm talking about the XOL business on that. Meanwhile, underlying insurance rates, at least homeowner rates, continue to go up, and that makes that business healthier. Remember, we participate in some quota share as well. That business is getting better that we participate via quota share. Commercial property rates continue to go up, and we do have a commercial property insurance book in Florida, so that's getting better. Our facultative book, which does some commercial business in Florida, is now going to be dealing with insurers that have gotten better rate on their business. There's various things going on. When it all shakes out, at least for us, I expect it to be quite good as June.
Okay. That's great color. Thanks. Just jumping topics. On the buyback front, again, excellent quarter on that. You bought back 4% of the company. That's an excellent number. What I'm sort of scratching my head on, though, is why don't you do more? The buyback, the stock's
What do you think, $1 billion or $2 billion next quarter, Greg?
It only took 35 minutes.
Keep in mind, we not only this quarter are effectively doing the buyback, we're also redeeming a $320 million bond. I think what all of that says is we're feeling very strong in terms of the portfolio, the current earnings, the future earnings, and frankly, we're also agreeing with you that it's a good time for us to be buying and to be buying in a very significant way. We looked at a quarter of a billion as if it was a significant way in the first quarter, Craig. I don't know how many others are going to be buying back 4% of their stock in this quarter.
Yeah, no. Actually, what's amazing is you actually earned even more, right? The payout ratio is still-- Yeah, it's great. Hopefully, we can do 4% every quarter for a while to come. Again, great start to the year. Thanks, guys. Appreciate it.
Thank you.
We'll take our next question from Vinay Misquith with Evercore Partners.
Hi, good morning. The first question is on Florida again. Sorry to beat a dead horse, but just curious as to why your experience is different from sort of what the brokers are saying on the Florida market.
I have to say, to begin with, what many of the brokers are predicting, we'll see what happens because they're predicting deals that are our future deals. There was some uniqueness to the deals that we've done so far as to why we had some competitive advantages as to why we were able to certainly maintain rate. I would go beyond that for the deals that we will be seeing. We have no interest if there is some meaningful decline in rates in participating in those portions of the business where there are meaningful declines. As I noted, there's pockets of the business where rates are getting better, starting with the primary insurance rates that are helpful with regard to quota shares. We have a lot of options in terms of how we put down our aggregate in the market.
We can put it on quota shares, we can put it on XOL, we can put it on facultative reinsurance, we can put it on commercial insurance. We're going to go at it the best way, where it's the healthiest rate and it makes most sense for us to put down. I'm telling you what our situation has been so far. I also tell you, I think we have some very good options that will take us into 6/1 that will give us a good portfolio at the end of that. Perhaps when you do put the market at the end of June all together, given what the broker said, you may see some decline. That remains to be seen, but I'm very happy with our situation.
That's helpful. Second point is on the lower commission expense ratio. That was certainly a positive this quarter. How much of the transition from Florida to XOL and the program business to normal business have you done? In other words, should we see this same level of expense ratio continuing for the next couple of quarters?
I wouldn't expect it to trend this way. I think what you've seen here is a decline over time. This was a fairly large impact here in the first quarter, due to a number of reasons. As I mentioned, it's both on the reinsurance side from the shift in business. Also on the insurance side because we've moved to more direct writing instead of program business. What you're seeing is that benefit coming through. I would expect this to be closer to a normal run rate than a continuing trend.
Okay, that is helpful. The last point was on the buyback. This quarter, you bought back about 90% of earnings. Is that a fairly good run rate sort of excluding the hurricane season that we should be thinking about? You mentioned before that the debt repurchase will not impact the buyback, correct?
That is correct. We look at that as capital. We did not look at that as capital before, so it does not affect our mentality for buying going forward. We have never given guidance on what we will buy back going forward, and we will not at this stage. I am not going to give you some formula relative to earnings or anything else. Let us say that it is clear and what we did in the first quarter that we think it is a very good way to improve results for shareholders going forward for us to continue to buy back a substantial amount of our stock.
Sure, fair enough. Just to clarify, the top line growth this year does not add any more capital requirements, correct?
That is correct.
Okay, that's it. Thank you.
We have time for one more question. We'll take our last question from Brian Meredith with UBS.
Yes, thanks. Good morning. Dom and Joe, can we talk a little bit about the casualty reinsurance market? Particularly, can you tell me, you talked about how you're seeing some rate in casualty. I assume you're talking more on the subject premium base rather than actually reinsurance. What are you seeing with terms and conditions on some of the casualty reinsurance and demand in that marketplace as well?
Most of the increase, yes, is coming from the subject bases. Primary rates, of course, are going up. That's having a positive impact on the subject base. That's not to say that we don't have some relationships or contracts, transactions where the reinsurance rate might be changing as well.
Okay.
You could be getting it from both spots, but that's very deal specific. Clearly, the underlying primary trend is what's driving the casualty market. I'd have to say that there's not really any overall dramatic change in terms and conditions relative to casualty deals.
Relative to demand, I think demand, again, other than the increasing subject base, we're not necessarily seeing cessions from customers in this space going up dramatically. Any growth there is basically being driven by rate and some new business opportunities. We're able to grow the portfolio now that we see margins improving there to entertain plenty of new business opportunities. Being able to leverage the relationships that we already have, and I don't mean that in a negative way, but to be able to expand our casualty relationships where we're providing property capacity to clients. We see the market improving. We have a much bigger appetite for entertaining casualty business.
Great, thanks. Then just quickly, could you chat a little bit about what you think the impact of alternative capacity is going to be on mid-year renewals, kind of what's your thought maybe even longer term, and how that potentially could impact the traditional market?
Well, it's hard to say. The talk is that it's having a dampening impact on rate levels. By the same token, particularly in Florida, we're seeing Citizens continue to depopulate new markets emerging, which will increase demand. Property values will continue to go up, which will increase demand. There is growth in the emerging economies, which allows us to spread our aggregate across the globe and not be so focused on one particular region or part of the world. Of course, we'll look to potentially participate in some of that through the facility that we're crafting.
Yeah, I would add to that some of these alternative capital providers can't really offer the same products that we offer, where we can kind of tailor our product to the client's needs. Also, we have relationships with many of our partners, business relationships that go back for many, many years, underwriting facilities around the world. We have some competitive advantages over this new capital, if you will. It's a little bit complex in terms of how this is going to affect everything the further you look out. We'll see.
Great. Thank you.
That concludes our Q&A session. I'll turn it back over to our speakers for any closing remarks.
I'd just like to thank everybody for joining us today.