Earnings Call: Q2 2014

Aug 7, 2014

Quarterly report

To the Martell Corporation's Q2 conference call. We're glad that you're with us and we look forward to discussing our results from the first half of twenty fourteen as well as my thoughts about the business. Joining me this morning is Ann Wilevsky, our Chief Financial Officer, who will review the overall financial results for the corporation. Mike Crowley is unable to be with us this morning, so my Co President, Richie Witt, will cover all of the insurance operations, then I will return to discuss our investments and Markel Ventures activities. Before we get started with the business of the call, we'll proceed with the incantation known as the Safe Harbor statement. During our call today, we may make forward looking statements. Additional information about factors that could cause actual results to differ materially from those projected in the forward looking statements is included under the captions Risk Factors and Safe Harbor and Cautionary Statement in our most recent annual report on Form 10 ks and quarterly reports on Form 10 Q. We may also discuss certain non GAAP financial measures in the call today. You may find a reconciliation of GAAP to these measures in Form 10 Q. With that, let me turn it over to Anne. Thank you, Tom and good morning everyone. We had a solid first half of the year. I think the numbers speak for themselves, so I'll jump right into the results. Our total operating revenues grew 35% to $2,500,000,000 in 20 14 compared to $1,900,000,000 in the first half of twenty thirteen. The increase is due to the inclusion of 6 months of underwriting revenues from legacy Alcaro product offerings in 2014, higher revenue from the Hagerty business and higher investment income due to our larger investment portfolio. Also contributing to the increase, other revenues were up 15% to $380,000,000 from $330,000,000 last year, primarily due to revenue growth within Markel Ventures. Moving into the underwriting results. Gross written premiums were $2,700,000,000 for the first half of twenty fourteen compared to $1,800,000,000 in 2013, an increase of 47% due to including 6 months of premiums from legacy Ocara products in 2014 versus 2 months of legacy Ultera premium in 2013. Net written premiums were $2,200,000,000 in the 1st 6 months of 2014, up 40% from the prior year and earned premiums increased 42% to $1,900,000,000 for the same reasons I just mentioned. Net retention was down in 2014 at 82% compared to 86% in 2013. The decrease which is in line with our expectations is primarily due to higher use of reinsurance on certain insurance products previously underwritten by Ultera. Our consolidated combined ratio for the 1st 6 months was a 98 for both 20142013. However, as a reminder, the 2013 combined ratio included transaction and other acquisition related costs of approximately $62,000,000 or almost 5 points related to the acquisition of Ultera. The combined ratio in 2013 also included approximately $25,000,000 or 2 points of catastrophe losses. Excluding the impact of catastrophes and transaction and acquisition related costs from the 2013 combined ratio, the combined ratio for 2014 increased 6 points compared to last year. The increase was primarily due to less favorable development from prior year loss reserves in 2014 compared to 2013. Less favorable development of prior year loss reserves is primarily attributable to our U. S. Insurance segment due in part to adverse development on our architects and engineers and brokerage excess Numbrella product lines. Additionally, prior year losses for the 6 months ended June 30, 2014 include $27,000,000 of unfavorable of unfavorable development on asbestos and environmental exposures within our other insurance discontinued lines segment. There was no comparable unfavorable development during the 6 months ended June 30, 2013. The consolidated combined ratio for the 1st 6 months of 2014 included approximately $167,000,000 of favorable development from prior year loss reserves compared to $204,000,000 of favorable development for the same period in 2013. The benefit of the favorable development on prior year loss reserves had less of an impact on the combined ratio in 2014 than in 2013 due to higher earned premium volumes in 2014. I'll take a minute now and discuss our asbestos and environmental reserve review, which we completed in the Q2 for 2014. Typically, we complete an annual review of asbestos and environmental exposures during the Q3 of the year unless circumstances suggest an earlier review is appropriate. This year, we saw unexpected activity on a small number of plans early in the year, which we believe warranted accelerating our annual review. During this year's review, we increased our expectation of the severity of the outcome of certain claims subject to litigation and as a result increased prior year loss reserves by $27,000,000 During our 2013 annual review, which was completed during the Q3 of last year, our expectation of the severity of the outcome of claims known at such time also increased. As a result, prior year loss reserves for asbestos and environmental figures were increased by $28,000,000 during the Q3 of 2013. The need to increase asbestos and environmental losses in each of the past 3 years demonstrates that these reserves are subject to significant uncertainty and volatility resulting from an unpredictable and unfavorable legal climate. Excluding the impact of transaction and acquisition related costs from 2013, the decrease in the consolidated expense ratio in the first half of twenty fourteen was driven by higher earned premiums in each of our ongoing operating segments compared to a year ago. Now I'll talk about the results of Markel Ventures. During the 1st 6 months of 2014, revenues from Markel Ventures were $355,000,000 compared to $314,000,000 a year ago. Net income to shareholders from Markel Ventures was just over $5,000,000 in 20 14 compared to $10,500,000 for the same period in 2013. EBITDA was $35,000,000 in 2014 compared to $40,000,000 in 2013. For the 6 months ended June 30, 2014, higher revenues attributable to our acquisition of Eagle Construction were partially offset by a decrease in revenues from our manufacturing operations as a result of fewer shipments and orders in the first half of twenty fourteen compared to 2013. Net income to shareholders and EBITDA from our Markov Ventures operations decreased for the 1st 6 months of 2014 compared to the same period of 2013, primarily due to less favorable results in our manufacturing operations, partially offset by favorable impact from our acquisition of Eagle Construction. Turning to our investment results. Investment income was $179,000,000 for the first half of twenty fourteen compared to $143,000,000 in the same period last year. Net investment income for 2014 was net of $33,000,000 in amortization expense from adjusting Ultera's fixed maturity securities to a new amortized cost basis at the acquisition date. The benefit of holding a larger portfolio was partially offset by lower yields. Net realized investment gains for the period were $26,000,000 compared to $34,000,000 a year ago. Included in net realized gains were $1,000,000 of other than temporary impairments as compared to $4,600,000 in 20.13. Looking at our total results for the year, our projected effective tax rate was 24% in the first half of twenty fourteen compared to 28% a year ago. The decrease in the effective tax rate in 2014 is due to anticipating a larger tax benefit related to tax exempt investment income in 2014 as compared to 2013. We reported net income to shareholders of $128,000,000 in the first half of 2014 compared to $117,000,000 a year ago. Comprehensive income was $481,000,000 for the 1st 6 months of 2014 compared to $109,000,000 a year ago. And as a result, book value per share as at the end of June 2014 was $511.28 an increase of 7% since the end of 2013. Finally, I'll make a couple of comments about cash flows and the balance sheet. Net cash provided by operating activities was $237,000,000 for the 1st 6 months of 2014 compared to $240,000,000 for the same period of 2013. The decrease is due to higher tax payments for our international operations partially offset by higher cash flows from underwriting and investing activities due to the inclusion of Altera. With that, I'll turn it over to Richie to talk about the insurance operations. Sales and specialty divisions as well as certain products written by our global insurance division. Year to date gross written premiums in the U. S. Insurance segment have increased 19 percent over the prior year. The increase was due in large part to Alterra lines business that are now included in this segment. Excluding these lines, premium volume is up approximately 5%, mainly driven by higher volume from the Hagerty business, which was new in 2013 in addition to growth in our casualty, environmental and other lines, which more than offset decreases in our brokerage property writings. The combined ratio for the 1st 6 months of 2014 was 98% compared to 92% in 2013. As Anne said, the increase in the segment's combined ratio was driven by less favorable development prior accident year loss reserves due in part to adverse development in the architects and engineers and excess in umbrella lines of business. Partially offsetting this impact was a lower year over year expense ratio. The improvement in expense ratio was primarily due to higher earned premiums from including the legacy Alterra products as well as the Hagerty product lines in 2014 versus 2013. Market conditions remain competitive for the wholesale and specialty divisions. However, we continue to achieve rate increases during the Q2 in the 2% to 3% range, which was actually slightly up from the Q1. Market conditions in the Global Insurance division remain extremely challenging with rate decreases in most classes. Property business and larger large casualty accounts are the most competitive and are showing the largest rate decreases in our Global Insurance division. Both our wholesale and specialty divisions continue to work to reduce their overall producer base, allowing our underwriters and staff to focus on those producers that are giving us the best opportunities to write profitable business. In a competitive market such as this, it's important to quote our best opportunities and not spend time practice quoting. Moving on to International Insurance. The segment includes all direct and facultative business written on our non U. S. Insurance company and comprises the insurance underwriting results of our Markel International division as well as that portion of our global insurance division underwriting results written on non U. S. Insurance companies. During the first half of twenty fourteen, gross written premiums in the International Insurance segment increased 20% to $653,000,000 and the combined ratio improved 5 points coming in at a 93. The increase in premium writings is primarily due to the Global Insurance division, which was created after our acquisition of Ultera and contributed 6 months of business in 2014 compared to the 2 months that were contributed in 2013. The improvement in the segment's combined ratio was driven by a 6 point improvement in the expense ratio and a lower current accident year loss ratio, partially offset by less favorable development of prior accident year loss reserve. As a reminder, last year's expense ratio for the 1st 6 months included approximately 3 points of cost associated with the Ultera acquisition. Additionally, the 20 costs. The impact of higher earned premiums from the Global Insurance division, however, had an unfavorable impact on our current accident year loss ratio since the global insurance product offerings generally have a higher attritional loss ratio than other products in the international segment. To finish up, I'd like to discuss the results of our Reinsurance segment, which includes all 3 d reinsurance programs written across our company, either by our Global Reinsurance division or the Markel International division. Gross written premiums for this segment were 7.90 $3,000,000 for the 1st 6 months of 2014, which was up from $241,000,000 a year ago. The increase in premium writings was primarily due again to including 6 months of writings of products previously written by Alpero in 2014 compared to only 2 months of writings included in our 2013 results. The combined ratio for this segment for the 1st 6 months was a 97 compared to 118 last year. Last year combined ratio included approximately 12 points of catastrophe losses. There's really no significant catastrophe losses in this year's results and approximately 19 points of costs associated with the acquisition of Ultera. Excluding these two items, the increase in the segment's combined ratio in 14% is due to higher contributions of premium from products previously written by Ultera. Ultera's reinsurance portfolio included a significant portion of casualty reinsurance, while the legacy Markel's portfolio was largely property reinsurance. Casualty reinsurance by its nature is inherently more volatile and is a long tail product. And as such, the impact of applying Martell's more conservative loss reserving philosophy had a more significant impact on 2014 compared to the 2013 numbers. Reinsurance market conditions are without a doubt the most challenging of any areas of the insurance marketplace. Pricing is down in most reinsurance lines of business and this is clearly being led by property reinsurance where rates are down anywhere from 10% to 30% in some cases. Summing up all the results of Markel's insurance operations, we had a good start to the year, a good first half of the year. Despite competitive market conditions, we believe that the Markel brand, a strong balance sheet and more meaningful market position has produced and will continue to produce additional profitable underwriting opportunities for Markel. At this point, I'll turn it over to Tom. Thank you, Verteek. As we've noted before, one of the great things about Markel is that we've got several methods to build the value of this company for you as our shareholders. Insurance, investments, industrial and service businesses and capital management activities all work together to produce comprehensive income and value for you. As is usually the case, not every cylinder in the engine of Markel will be firing at the same rate. The good news is that with our multiple cylinders, the engine keeps moving the car down the road at a pretty good rate of speed. Specifically, as Ann noted earlier, that shows up on the speedometer as comprehensive income of about $480,000,000 through the first half, an increase of 7.2% in the book value per share. The longer term and more meaningful rolling 5 rate of return, a compound annual growth rate of book value per share to be between the teens and was 13% as of June 30. During the first half of twenty fourteen, we enjoyed excellent returns in our investment activities. The total return from the portfolio was 4.6% with equities up 8.6% and fixed income up 3.5%. Both of these measurements are more than satisfactory on an absolute and relative basis and I'd be happy to sign up for them indefinitely in the future. Sadly, that option is not available, so we'll continue to come to work every day and make the best decisions we know how to make for these good results going forward. That's what we've done for a long time and I'm confident that our time tested investment discipline will continue to work well with our shareholders. I'm also happy to report to you that the recasting of the investment portfolios we picked up in the Ultera acquisition is largely complete. We've reset the fixed income portfolio, largely eliminated the high cost alternative investment activity and continued the process of building up the equity investment in keeping with our traditional investment discipline. As of June 30, equities represented 51% of shareholders' equity, up from 48% at year end and we continue to methodically build the equity portfolio. We've enjoyed a roughly 700 basis point addition to our total return when we allocate money to equity compared to fixed income over the last 25 years. We'll look to continue to maximize the amount of equity exposure that we can given our comprehensive view of the state of our business, our balance sheet positions and the opportunities we see. Turning to Markel Ventures, we picked up some steam in the Q2 after a slow start in the 1st part of the year. Revenues rose 13% from $313,000,000 to $354,000,000 More importantly, our share of EBITDA from the Marlin Venture's operations was $35,100,000 a decline of 13% from the $40,300,000 we earned in the first half of twenty thirteen. For the Q2, EBITDA was flat at $21,000,000 versus $21,000,000 a year ago. As we stated before, the manufacturing operations within our Vintrus group are lumpy businesses where big orders come irregularly and make a big difference on the bottom line. The first half of twenty thirteen was a particularly robust period and the first half of twenty fourteen was a bit light. Fortunately, we picked up steam in the Q2 compared to the first. The order books are in pretty good shape and I'm optimistic about the balance of the year. Also, I'm pleased to announce that after the quarter ended, we completed the acquisition of Cottrell, the leading manufacturer of car hauls. The initial consideration for Cottrell was $130,000,000 and this is the largest transaction yet for Markel Ventures. With the addition of Cottrell, the run rate for the Markel Ventures Company now rounds to $1,000,000,000 I continue to expect double digit EBITDA profitability the group and this is becoming a more meaningful contributor to the earnings and the value of Markel. We continue to see and review a meaningful number of opportunities at Markel Ventures. We're picky about choosing our partners and we've got the alternatives of publicly traded equity securities, privately held businesses and our own stock as daily choices for how we allocate capital. To sum it up, those of us sitting around this table have 2 jobs. 1, we've got to run our existing businesses to the best of our ability and earn good returns on the capital. 2nd, we've got to make good capital allocation decisions with the money we make for doing job 1. I'm pleased to report that we'll produce some good results for you on both fronts and we look forward to the challenge of continuing to do so. With that, we're delighted to take your questions. Our first question comes from the line of Mark Hughes from SunTrust. Please proceed with your question. Hey, good morning, everyone. This is Rob Myers on for Mark Hughes. Just two questions. One, this dip in favorable prior year loss we saw in the quarter. Is that kind of a blip? Or is this something we should expect to continue going forward? Mark, I think we've said in years past that the history does not dictate the future particularly in this arena. So creating an expectation around prior year reserve based on history is not something we've typically encouraged. That said, what we would expect for this year is something that will probably be slightly less than last year, but not dramatically less. So I think some of the adverse development that you saw this quarter, we're hoping that we have taken care of this quarter and won't repeat. Okay. Thank you. That's very helpful. And then lastly just wondering if you guys had an update on pricing competition loss trends in the med mal and Just looking at our most recent rate monitoring, we're Just looking at our most recent rate monitoring, we're slugging it out and getting a couple percentage points of price increase on that business, but it's incredibly competitive. In terms of workers' comp, that's probably the strongest part of the market and I didn't mention that in my comments. But in workers' comp we're sort of probably mid single digits in terms of increases on workers' comp business. And in California, that could be significantly more depending on the class and depending on the geography in California. So those two markets are on sort of the better end of the scale of where various products are in the industry. Okay. Thank you very much for taking my questions. Our next question comes from the line of Jay Cohen from Bank of America Merrill Lynch. Please proceed with your question. Thank you. A couple of questions. I guess the first one is on the reinsurance segment. You guys have been very upfront about moving the old Alterra business onto your reserving methodology and that puts some near term upward pressure on loss ratios. I've seen that with past deals. So it's not surprising. I guess looking forward in that business, maybe we have 2 potential opposing forces. 1 is the market conditions all else being equal would suggest loss ratios get worse. At the same time as you kind of have already moved this business or at some point will have moved this business into your own reserving methodology to expect to see some improvement down the line. My question is, do you think you can hold those margins flat? Or will the pricing dynamics kind of overwhelm whatever changes you're making in the reserve side? Jay, obviously reinsurance is incredibly competitive right now. To the extent we're still writing accounts, we believe the pricing supports the margins we want to produce on the business. And honestly, at this point, I'm not particularly I'm pleased with the business we've put on the books this year. The big question to me is what's going to happen next year, January 1 and forward if people are looking for price concessions next year. I'm not sure that it's there. I think this market should be quite honestly at the bottom as people are being market share As you know as you say, we've been putting Markel's sort of level of conservatism and margin of safety on the unknowable is where does the market go from here. I believe we're we reinsure that given all we can give, it will be interesting to see what the competition is willing to do as we go into 15. Yeah. Let's hope we find some sort of floor. The other question I had was regarding the comment about I guess calling to some extent the producer base within wholesale and specialty. What's the outcome of that? I mean should we expect because of that action top line growth to slow down? No. When we've I mean we're always managing your producer base and you're always trying to it's sort of the eightytwenty rule. It's interesting that the top 20% of your producers probably give you 80% of your business. And then you've got to decide with that the rest of that group do they have potential to move into that other group or do you need to move on and spend your time elsewhere? So you're always managing your producer base. Our in the past what we've seen is when we focus more on the people who truly are producing the business for us, volume goes up. We don't tend to take a step back. We tend to continue to move forward. And in fact, we're seeing when you back out what's happening on the property book where pricing where we've had to reduce because of pricing, we're up in most of the other lines of business in wholesale and in the lines where we're not in some sort of pricing action on specialty. Again, we're seeing decent growth. So, no, I think it's just a healthy thing that we're always doing and I think we'll continue to see modest growth as we go forward. That's helpful insight. Thank you. Our next question comes from the line of Mark Wilde from RBC Capital Markets. Please proceed with your question. Hey, good morning. A couple of questions. Did you have any losses that you're identifying as catastrophe losses in the quarter? Nothing to note. Any even uptick at all in weather related or non cat losses that is worth highlighting? Nothing at all worth highlighting? Nothing that we you have a threshold for a named catastrophe mark. And And really we did not have anything that would have hit the threshold for any of the named cats. So it was a very quiet first half the year. Now that's not to say we didn't have some attritional losses. We certainly did, but nothing that rose to a level of significance. Okay. A question for Tom. It's just a not being able to hear and write quickly enough question. In the context of Markel Ventures, you said that something is now at a $1,000,000,000 rate or amount. What was that thing? It's the revenue line going forward of the entire Markel Ventures Group. Got it. Thank you. And my last question, now that we've now that you've had Ultera for a full year, the amount of premium that you retained from that franchise, how does that compare relative to your very initial expectations? From my perspective, it seems like relatively more premium was retained than maybe was initially expected, but be interested in your thoughts. Mark, this is Richie. Yes, I'd agree with you. I would say we've retained more of the premium than we would have expected initially. I think if you look at our 10 Q, we have a pro form a gross written premium numbers in there for the quarter year to date. And I think actually in the quarter, we were ahead of that pro form a number. And for the 6 months, we were basically flat to that number, which some of that is growth in legacy Markel products, but I have been very pleased with the amount of the premium we've held on to from the acquired products of Ultera. Would you say that the underlying quality of the book has been better than initial expectations? Or it's just the way the market conditions have developed allowed you to retain perhaps more than you might would have initially judged? I think the quality has been about what we thought when we went into the deal. I think the most important thing in any acquisition and I think I've said this before on the calls is being able to keep the talent, keep the people. And we have done a very nice job there. People have stayed. And I think I contribute the success we've had to the fact that the talent has stayed with us. I think the quality of the business is about what we assumed. Mark, I'd add one point to that and that is the marketplace acceptance of Markel, which is a bigger balance sheet that has the talent that Richie spoke of that has gone well. We didn't exactly know how to put pencil and paper that going into it, but we certainly believe that the combined entity would be more attractive as an insurance partner for the world and that's proven to be the case. Yes. That's a really good point that Tom makes. People like to talk about synergies and acquisitions and we try to stay away from those words. But it is fair to say we've seen a number of large accounts particularly on the reinsurance side and then the global insurance side where the Markel brand and the balance sheet strength and the relationships that Markel has throughout the industry has made a difference in terms of business coming to us. So clearly that has happened. Okay. Thanks very much for the insights. Good quarter. Thanks. Our next question comes from the line of Charles Gold from Scott and Stringfellow. Please proceed with your question. Tom, hoping you would go through an Now that the run rate in revenue is $1,000,000,000 looking at the 2015, let's say, if the and also factoring in that the metrics you were looking at when you bought companies was roughly 6 to 7 times EBITDA. So the assumptions I would use on the back of my envelope would be next year's revenue sans an acquisition $1,100,000,000 that the companies that we bought may not have lived up to the 6 or 7 times EBITDA, so I use 8 times. So I multiply the 1.1 times 12.5 and I got $137,500,000 of EBITDA and I bring half of that to the bottom line in net income and get just under $5 a share in earnings on an annual basis. Is that in the right ballpark? Or am I thinking incorrect? It was so pleasant. I think I'll go home and say 2015 is done. Your back of the envelope Your back of the envelope and thought process is directionally correct. The thing that we can't take for granted is that these things are always easier to say than they are to do. So there'll be an immense amount of work to make that happen. But those sort of rough, rough back of the envelope calculations are directionally correct. My expectation is that. Thank you, Chuck. All right. Our next question comes from the line of Jay Cohen from Bank of America Merrill Lynch. Please proceed with your question. Yes. I guess first just maybe a follow-up on Markel Ventures. I'm looking at this is a simple calculation just the margin on the non manufacturing businesses. And they went down fairly dramatically from first half twenty thirteen to first half twenty fourteen. And I don't know if that's a business mix issue some of the different businesses, but I'm wondering if there's a reason why they went down so much? Right. On the non manufacturing margins that I don't have the numbers in front of me, but directionally what will be happening is probably the biggest swing is in our healthcare area. And there are 2 things going on there. 1, the immense changes that are happening in the healthcare area have proven to be tougher challenges than what I would have expected to begin with. We're addressing them. We're making the best we can. But let's just say that that has been more of a challenge than what I expected. Secondly, within the health care, there are things that we're doing where we're funding and we have our foot on the gas to grow rather quickly and we're expensing new office opening companies specifically in the realm of partner MD and the current front end expense that we think produces wonderful returns on investments. But we are spending that money right now. And realistically, I would say it's this time next year before you start to see whether those initiatives are indeed bearing the fruits that we expect from them. And the bottom line, just like in the insurance business, either they will be bearing the fruit that we expect or we'll stop building it, 1 or the other. Got it. And then maybe a question on the reserve. So the adverse development in the architecture and engineers book and the access and umbrella lines, what were some of the key underlying trends that you were seeing that drove that change? Was this a severity issue? And were there any so 1, what were the trends? And 2, were there any particular classes of business within the Access and Umbrella area? In terms of I'll start with architect. It's a relatively small line of business for us. And I think if you were to go around and look at the industry everybody's been struggling a little bit with architects probably since 2,008 with the credit crisis architects and engineers got pulled into a lot of new and different ways of seeking recovery post-two 1000 and 8. So it's been one we've been chasing a little bit. And the bottom line is we'll either get it right or we're going to write a whole lot less architects. And starting I mean we don't write a whole lot to start with, but it could be a whole lot less if we don't feel like we're getting the right rate for it. On excess and umbrella, that class has been a terrific class for quite a while. We've seen a little bit of early development recently and we've probably seen some auto losses, which is not surprising. We tend to see some heavy autos in excess in umbrella, but we've seen a little bit of auto losses and we've seen a little bit of early losses. The team again is on top of it and we're making some changes to address it. And again, we'll either get it straight or premium volume will decrease. That's great. Sounds like you were pretty proactive in that book. We try to be. Thank you. Thanks. Our next question comes from the line of David West from Davenport. Please proceed with your question. Good morning. In the other revenue, other expense tables on the insurance side, you have your MG and A operations and then the line item life and annuity. And I thought most of the Alterra life and annuity was in discontinued operations. Can you dig down and tell me what that life and annuity line is associated with? David, it is in discontinued and it is related to the Alterra discontinued life and annuity book. It's just not underwriting. Okay. Right. And I guess on the revenue side, I don't have the schedule in front of me. The revenue side would just be some small premium adjustments. I think it's a relatively small number. They that could go it will be a few $1,000 each quarter as they're always they're constantly adjusting premium. And then on the expense side, that's just the amortization, the accretion of the discount on those life and annuity reserves. So that will be a feature that shows up from now for the next 50 years on a decreasing basis. Okay. Decreasing basis that's encouraging. Right, right. Just as that amortizes off. All right. Thanks very much. There are no further questions in the queue. I'd like to hand the call back over to management for closing comments. Thank you very much. We appreciate you joining us. We look forward to chatting with you next quarter. Take care. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.