Earnings Call: Q3 2013

Nov 7, 2013

Quarterly report

Greetings and welcome to the Markel Corporation Third Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tom Gaynor, President and Chief Investment Officer. Thank you, Mr. Gaynor. You may begin. Thank you, Rob. Good morning. Welcome to the Markel Corporation 2013 Q3 conference call. My name is Tom Gayner and it is my privilege to greet you this morning and in a few minutes turn things over to our Chief Financial Officer, Anne Wiletzky and my Co Presidents, Mike Brownlee and Richie Witt to give you a brief update on how things are going at Markelvey's Day. Prior to this call, I was speaking with one of our long term shareholders about the conference call process. He told me that he has owned the stock for about 20 years and that our call was boring. He said that he really couldn't imagine us saying anything in the call that would change his mind about Markel and his long term ownership of the stock. I thank him for his honesty. And actually I agreed with him. My number one goal is actually to still be here 20 years from now and delivering a report just as boring as this one. I suspect what he told me is true for our loyal and long term owners to provide us with the capital we need to run this business. I also suspect it's true for shorter term followers of the stock to usually issue a sell recommendation immediately following this call. As the character Inigo Montoya said in The Princess Bride, you keep using that word. I don't think it means I'll leave it to those of you with access to the long term chart of Markel to decide which unchanging point of view you wish to embrace. The force that propelled the 27 year line on the chart up into the right cannot be found within the cells of the spreadsheet. Boring works for me when it comes to talking about our financial results. We shouldn't be that excited. I'm all in favor of grinding it out along the same lines that we have to our 27 years as public company. We looked after the capital that you entrusted to us and we've produced wonderful returns for the owners of this company. Roughly speaking, the longer you've owned Martell, the more money you've made. And by the way, while it may look and sound boring, I can promise you that we're having a lot of fun doing this. There's not a day that goes by when I don't hear laughter in this office. In addition, there are some days when we're simply stunned by what happens. I promise you that we are not bored. With that privilege, let me share with you what I do consider to be the most part of our call, timely Safe Harbor statement that our General Counsel advises me to share with you. 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 Statements in our most recent Annual Report on Form 10 ks and Quarterly Report on Form 10 Q. We may also discuss certain non GAAP financial measures in the call today. You may find a reconciliation to GAAP on these measures on our website www.markelcorp.com and our quarterly report and Form 10 Q. Anne? Thank you, Tom, for always starting us out with a smile. Good morning, everyone. I'm pleased to be able to report that for the 1st 9 months of 2013, we have produced strong underwriting results and profitable growth in each of our legacy operating segments. The Alpero segment has performed within our expectations and we continue to make significant progress with the integration efforts. Our total operating revenues grew 39% to $3,000,000,000 in 20.13 from $2,200,000,000 in 2012. The increase is due to a 42% increase in revenues from our insurance operations, which include $531,000,000 from the Altaira segment and a 41% increase in revenues from our non insurance operations, which we refer to as Markel Ventures. Moving into the underwriting results. For the 9 months of 2013, gross written premiums were $2,900,000,000 which is an increase of 53% compared to 2012. The increase in 2013 was primarily due to $715,000,000 of premiums from the Altaira segment since our acquisition on May 1, 2013, as well as higher gross premium volume in the Specialty Admitted and Excess and Surplus Lines segments. The increase in specialty admitted is driven by premiums from the Hagerty and Tomco businesses. Within the Excess and Surplus Lines segment, the increase is due in part to the impact of more favorable rates and improving economic conditions. Net written premiums for 2013 were approximately $2,400,000,000 up 44% to the prior year for the same reasons I just mentioned. Net retention was down in the 1st 9 months of 2013 at 83% compared to 89% in 2012. The decrease in net retention is due to the inclusion of premiums written by Ultera from May 1 to September 30, 2013. Net retention in the Altair segment for the 5 month period was 66%. Net retention for the legacy Markel segments was flat at 89% for both $30,000,000 of earned premium from the Alterra segment for the 5 months ended September 30, 2013 as well as higher earned premium volume in Specialty Admitted and Access and Surplus Lines segments. The increase in Specialty Admitted is due to earned premiums from the Hagerty and Tomco businesses. Our combined ratio was 97% for the 1st 9 months of 2013 compared to 96% in 20 12. The increase in the combined ratio was due to a lower prior year loss ratio, partially offset by a lower expense ratio compared to the same period in 2012. During 2013, the benefit of the favorable development of prior year's loss reserve had less of an impact on the combined ratio when compared to the same period of 2012 due to higher earned premiums in the current year. The 2013 results were also impacted by the Alterra segment, which added 6 points to the combined ratio driven by $70,000,000 of merger and acquisition costs and $33,000,000 of catastrophe losses. Favorable development on prior year loss increased to $281,000,000 or 12 points compared to $260,000,000 or 17 points in 20 12. These amounts are net of $28,000,000 in 20.13 $31,000,000 in 2012 of unfavorable loss reserve development on asbestos and environmental exposures within our discontinued Lyme segment. We complete our annual review of these exposures during the Q3 of each year. During this year's review, our expectation of the severity of the outcome for known claims increased and we increased our prior year loss reserves accordingly. The decrease in expense ratio for the 1st 9 months of 2013 is driven by higher earned premiums in our legacy Markel segment compared to 2012, partially offset by the impact of the merger and acquisition costs incurred by Alpera. Excluding the merger and acquisition costs incurred in 2013, the inclusion of Alpera had a favorable impact on the expense ratio. Alterra has had a lower expense ratio than we have had historically. The expense ratio for 20 12 was unfavorably impacted by the prospective adoption of the new DAC standard, which increased our expenses by $41,000,000 or 3 points on the 2012 combined ratio. Next, I'll discuss the results months of 2013, revenues from Markel Ventures were $486,000,000 compared to 345,000,000 dollars in 2012. Net income to shareholders for Markel Ventures was $18,000,000 in 2013 compared to $9,000,000 in 2012. EBITDA was $64,000,000 in 2013 as compared to $41,000,000 in 2012. Revenues, net income to shareholders and EBITDA from Markel Ventures increased in the 1st 9 months of 2013 compared to the same period of 2012, primarily as a result of more favorable results at AMS Bakery Systems and our acquisitions in 2012 of Havco and Reading Bakery Systems. Next, we'll turn to the investment results. Investment income was up in income for 2013 included $44,000,000 of investment income attributable to Alterra, which was net of $39,000,000 in amortization expense from adjusting Altera's fixed maturity securities to a new amortized cost basis at the acquisition date. Net investment income also included favorable changes in the fair value of our credit default swap of $9,000,000 as compared to $14,000,000 for 20 12. Excluding the impact of Alpera and the credit default swap, net investment income for the 1st 9 months 2013 decreased compared to 2012 due in part to a decrease in our fixed maturities and an increase in cash and cash equivalents. Net realized investment gains for 2013 were $41,000,000 compared to $25,000,000 in 20 12. Included in net realized gains were $4,600,000 of other than temporary impairments as compared to $4,200,000 2012. Tom will discuss investments further in his comments. Looking at our total results for the 9 months. Our effective tax rate was 28% in 2013 compared to an effective tax rate of 19% in 2012. The increase is primarily due to higher estimated earnings taxed at a 35% rate and due to anticipating a smaller tax benefit related to tax exempt investment income as a result of projecting higher pre tax income for 2013 than 2012. We reported net income to shareholders of $182,000,000 compared to $197,000,000 in 2012. Book value per share per share increased approximately 14% to $4.62 per share at September 30, 2013 from 4 0 $4 per share at year end. The increase is primarily due to equity issued in connection with the acquisition of Altera and 2 $53,000,000 of comprehensive income to shareholders. Finally, I'll make a few comments about cash flow and the balance sheet. Net cash provided by operating activities was $542,000,000 for the 9 months ended September 30, 2013 compared to 2 $40,000,000 for the same period of 2012. The increase was driven by higher cash flows from underwriting activities and investment The increase in cash flows from underwriting activities is primarily a result of the acquisition of Alterra and higher premium volume primarily in our Specialty Admitted excess and surplus line segments. Invested assets at the holding company were $1,100,000,000 at September 30 compared to $1,400,000,000 at year end. The decrease in invested assets is primarily the result of cash paid for the Alterra acquisition, partially offset by a net increase in debt. I'd like to close with a quick mention of the announcement we made on October 9, 2013 regarding our offer to acquire AbbVie Protection, a U. K.-based integrated specialist insurance and consultancy group. Subject to shareholder and regulatory approval, we expect this to close in January of 2014. At this point, I will turn it over to Mike to further discuss operations. Thanks Anne. Good morning. The results for legacy Markel North American operations were very good and continued the positive trend we've seen during the year. Gross written premiums increased 20% over prior year in Q3 and 23% over prior year for 9 months. The E and F segment performed well again with all five regions again showing growth. Gross written premiums increased 8% over prior year in the quarter 12% over prior year for 9 months. The combined ratio of 87.8% for the quarter was 1 point better than the prior year. The year to date combined ratio was 80.9% compared to 90.6% for the same period last year. The segment continues to improve operating efficiency and the service to our agents and brokers. Confirmation of this comes from the fact that annualized premiums for underwriter is up over 8% and the upgrades to our wholesale broker portal continue to receive very positive reviews from our agents. During the quarter, we announced that John Latham, President of the E and S division will be stepping down from that position on January 1, 2014. John has begun his plans for retirement in 2016 and has elected to spend his final few years with Markel focusing on our customers and assisting me with special projects. John has done an exceptional job leading the E and S division over the past few years and he is to be commended for the excellent at Markel over the next couple of years. Brian Sanders who joined Markel with the Ultera acquisition will assume the position of President of E and S division effective January 1, 2014. Brian has a long and outstanding background in the wholesale world having been in the industry for 32 years. He has served in leadership positions with Alterra, and HRH where we work together. We have great confidence that Brian will continue the success achieved under John's leadership. The Specialty Admitted segment also had a very good quarter. Gross written premiums increased 37 over prior year in the quarter and are up 39% year to date. The combined ratio in the quarter was 90.3% or 18.9 points lower than prior year due to lower calendar year loss ratio and higher prior year takedowns. Year to date combined ratio is 100.8 or 7.4 points lower than prior year. As Ann said, the increase in gross written premiums in the specialty division continues to be driven by the Hagerty and Tomco businesses. In this segment, we're continuing to execute on our plans, which we talked about in the last call to exit unprofitable lines and non renew certain specific accounts in order to improve our underwriting results for this segment. With regards to our product line leadership headed by Jerry Albanese, the quarter was very active. We're continuing to execute plans integrating the Ultera Professionals within the product line leadership group. They have successfully combined brokerage property teams and have adopted the Ultera property integration tools and pricing for the book. Mike Miller who led the marine practice at Ultera has expanded his responsibilities and has both commercial ocean marine and mineral marine reporting to him. We continue to hold joint product line meetings across professionals. Meetings have been held with the marine property professional liability and energy teams. We've also now consolidated all of our Homeowners' business into our personal lines division under Audrey Henkin's leadership. Previously this business resided in Ultera Wholesale and their personal lines operation. The only comment that I will make with regarding to the rate environment is that we are still getting modest rate increases although down slightly from earlier in the year. In summary, a very good quarter for North American operations. I'll now turn the call over to Richie Webb. Thanks, Mike, and morning, everyone. I'll start my comments with Markel International's 9 month results and then give an update on the Ultera integration. Markel International had an amazingly consistent and sticking with Tom's team somewhat boring result for the 1st 9 months 2013. When I say boring, I mean that in the absolute best of ways. Boring is good in insurance. International produced consistently strong results driven by solid prior accident year reserve releases and light catastrophe losses. Gross written premiums increased 3% to 725,000,000 dollars Areas of growth included our specialty book as well as our Singapore and Netherlands branches. Pricing trends have been very the Netherlands branches. Pricing trends have been very consistent throughout the year with modest single digit price increases. However, in many areas of the market things remain competitive, particularly in cat exposed property, both insurance and reinsurance, professional liability, retail and equine lines. There is much discussion in the industry on where pricing trends are headed right now. At Markel, we are going to continue to push for price increases. Given the current interest rate environment, there really is no room to reduce rates and produce acceptable returns. International's combined ratio for the 9 months of 20 132012 was an 88 combined. As I said previously, both years benefited from relatively wide catastrophe losses and solid prior accident year reserve releases. While the 9 months results were delightfully boring at Markel International, the team was extremely busy and anything but bored with the integration of Alterra going on and the announcement of the proposed acquisition of AbbVie Protection. As Ann said, if all goes as expected, this deal will close in January next year. We are extremely excited to add the AbbVie team to Markel International. AbbVie adds unique retail products and services to our international insurance portfolio and we see opportunities to grow their already strong franchise in legal expense and professional fee protection. Now I'd like to give a quick update on the acquisition of Alterra. It's been approximately 6 months since the deal closed on May 1. We've made excellent progress bringing the 2 organizations together. And with every day that passes things feel more and more like business as usual. As Ann stated, Alterra's results largely been in line with our expectations and this is a really important statement as our expectations for Ultera are very high. Within the Ultera segment, premium volume in the Global Insurance and Reinsurance divisions have met and in some cases in excess and surplus have also performed well. The Ultera segment results for the 9 months, which include $70,000,000 of merger and acquisition costs are again in line with our expectations and we have begun the process of establishing a margin of safety on loss reserves. Obviously, this is similar to what we have done with all past acquisitions. We're looking forward to the day in the not too distant future when we no longer talk about legacy Markel and legacy Alterra and simply discuss our Markel results. I believe we're well on our way at this point. As I stated last quarter, we still have some work to do with our systems and our back office processes in order to fully integrate all elements of Ultera operations into our existing model. As such, we're managing and reporting the results of the legacy tariff segment and expect to continue to do this for the remainder of the year. We have several initiatives in place to make the changes in systems and processes that are necessary in order to implement a new segment reporting structure by the Q1 of next year. You also legacy Ultera Life and Annuity book, which is in runoff in our other discontinued lines segment. With 1 quarter to go, we're on target for an excellent year with outstanding underwriting profits and very nice book value growth. Now I'd like to turn it over to Tom. Thank you, Richard. As we've alluded to earlier, we're delighted to report our year to date results to you. In our investment operations, we are 23.2% on our equity portfolio for the 1st 9 months of 2013. Amazingly enough, that's an outperformance of 3 50 basis points compared to the S and P 500 return of 19 point 7%. Let me repeat, we're 3 50 basis points ahead. Normally, I would to underperform in a rip roaring bull market since we are conservative and defensive in nature. We won't complain about ourselves. More importantly, this honest and talented managers, capital discipline and reinvestment opportunities at fair prices works. It is time tested and we are sticking to it. In our fixed income operations, we earned a return of negative 0.6%. Interest rates are moving up and Detroit among others going bankrupt. As such, we're keeping our duration short and credit quality as high as we know how to make it. In total, we earned 4.5% on our investments and I'm very pleased with those results as they contributed meaningfully to the comprehensive income of the Markel Corporation. 4 percent to $486,000,000 from $345,000,000 a year ago. Our share of EBITDA from the company rose 50 4% to $64,200,000 up from $41,500,000 a year ago. During the Q3, we added Eagle Construction to the family. Eagle is the leading Richmond based homebuilder and we've known the principles of the company for 2 generations. We formally worked with them together for several years in our Markel Eagle joint venture and we are delighted to welcome the homebuilding organization to Markel. One data point that might help you understand our respect for Eagle is that in 2,008 and 2,009 when the construction industry collapsed and homebuilding stood at the very epicenter of the financial crisis, Eagle remains profitable. These are our kind of people and we that they are with us now. Finally, I'd like to close with one thought that I think separates Markel from so many other companies and even from Markel in its earlier days. Mainly, from where we sit today, we get to see opportunities to deploy capital in our existing insurance businesses, new insurance opportunities, publicly traded securities, privately held businesses, expansions and additions to businesses we already own and to an increasingly robust network of people we know and have done business with. Some people would call this deal flow. I think a better name for it is idea flow, because it creates a 3 60 degree view of the world. I believe this is highly unusual and incredibly valuable. Most companies are more constrained in their notions what they can and will do and how they think about the allocation of capital. We are a comprehensive company. We have a comprehensive idea flow that covers the Waterfront and we have experience at successfully reinvesting our capital in all sorts of businesses all around the world. There is not a long list of organizations with those characteristics and the demonstrated trackers are doing reasonably well. Hang on folks, we are just getting started and we look forward to your questions about the front. Rob, if you'd open up the Our first question is from the line of Doug Merwinder of SunTrust Robinson. Please proceed with your question. Hi, good morning. I just had really one question for Mike. Notice the in the Specialty Admitted business, the reserve releases in this quarter actually accelerated. And I was just wondering what accident years or what sub lines or segments did you see that? And I guess related to that question just how your efforts to I guess reprice or improve the workers' confidence is going? Quarter? 1, it's going very well. 2, 1st comp drove a lot of that. And what was it 11 to 12 years? Right. Yes. That where we had the releases. But that business is performing very well. And a lot of it also has to do with the move of premium from California to non California business and it's growing. Okay. And actually it just reminded me of another question. There's been a couple competitors in the workers' comp space who have had some trouble. And I'm not sure how much overlap you had with them. But has that triggered any positive disruption in the market for you where you're maybe seeing more submissions or you're getting a tiny bit more price leverage because of maybe less supply in the market? We are getting rate. I can't comment on whether that where that business is coming from. We are growing. We are getting rate. We are moving into different geographic areas. And the business I've said for a number of quarters that First Comp is performing and on the path that we have set out for them when we acquired them in November of 2010. And they're executing their business extremely well in a tough comp environment. We couldn't be more pleased with the direction of that business. Okay, great. Thanks. That's all my questions. Our next question comes from the line of Mark Dwelle of RBC Capital Markets. Please proceed with your question. Yeah. Good morning. Just a couple questions. Richie, you talked a little bit about Abby Protection. Can you just give us a little sense of kind of what their historic level of premiums has been and where their combined ratios are and things like that just to kind of frame the possibilities there? Sure. Sure. It's a bit of a hybrid business, Mark. And so you have to think of it in terms of revenue is really quite honestly because it's both an underwriting business and a service business. Historically, about £40,000,000 in revenue, so call that about £60,000,000 They've been able to drop about £10,000,000 call it about £15,000,000 to the bottom line. And it's a combination of underwriting risk where they take underwriting risk on legal protection or other professional services like for if a person is brought in on tax audit or something like that by the internal revenue in the U. K. As well as they provide services such as advice, legal advice and some of that tax advice. So it's an interesting business, because it's a little bit insurance, it's a little bit service. It fits very nicely into our retail operations. It gives us additional product set to offer our small to medium sized retail customers. And so we think it really kind of expands what we can do in the U. K. Retail market. Thanks. That's really helpful background. And the question I guess maybe for Anne or Tom. The level of cash on the balance sheet not within the investment classification, but just the actual cash, it's probably the highest I've ever seen it. Is there is this just taking the opportunity to build cash resources with the debt markets the way they've been? Or do you have some other kind of allocation in mind for some of that cash? Well, the number one is the tactical reason that it keeps growing is because we're making a lot of money. So that's a good thing. And the bond portfolio for instance, as I said, it's not really much of a yield curve, it's a yield line. So the opportunity cost of staying short and staying in cash and preserving all the optionality for what you want to do with it doesn't incur much in the way of opportunity cost. So those are some factors going on. The other factor has been we did just do a major acquisition. We've got another one in the works right now. We're buying companies at Markel Ventures. We have a lot of opportunities to deploy that. But as always, you can expect us to be careful and methodical about the way we would go about it. And you can also expect at some point that with higher interest rates, which I expect, we'll invest the bond portfolio in a longer term fashion than what we do right now. Okay. Fair enough. And one last thing just a numbers question for Ann. When you you were saying the portion of amortization related to the Ultera piece of investment income that was $39,000,000 you had said? That's correct. So they earned $44,000,000 and the amortization was $39,000,000 So really almost no benefit there this quarter? No. That $44,000,000 was net of the $39,000,000 Right. Got it. And also that's sort of an interesting feature of our financials since we took over Ultera. You're not seeing a huge increase in investment income because of that amortization, but where you are seeing it is in the cash flow. $540,000,000 of cash flow is a significant increase over what we had at this point in the last year. And that amortization sort of explains some of the difference between what you're seeing through the P and L and what you're seeing on the cash flow statement. Okay. That's very helpful. Thanks. I'll stop there. Thank you. Our next question Thank you. Our next question comes from the line of Jay Cohen of Bank of America. Please proceed with your question. Yes. Thank you. A couple of questions. First is in the Q3, it looks like the Ventures business earnings were a bit low quite a bit lower than the run rate of what we had been seeing. I'm just taking kind of other revenues minus other expenses. What's going on there? Jay, I don't actually think there's anything significant going on there. If you're comparing it to the prior period, it could just be timing of orders. But in looking through the quarter results, there wasn't anything worthy of note. Because it looked to me like the net of other revenues and expenses have been running $15,000,000 to $20,000,000 This quarter it looked like it was closer to $8,000,000 Are you saying even though that looks like a big drop there's nothing unusual at all? There wasn't anything unusual it. Like I said, there can be up worthy of like I said, there can be some timing and some seasonality in the numbers, but nothing worthy of comment. And by the way, is a bit of a guess on my part. What we look at in terms of looking at the businesses and how they're doing is the EBITDA and the cash generation of the business itself. And we talked about that earlier in the call with the numbers. The Markel Ventures portfolio companies are doing just fine. We had previously used as a rough shortcut to just the other revenues and other expenses as a pretty good proxy for what's going on in our co venture. There are other things that go on in other revenues and other expenses that might distort that number a bit. But the directional information we gave you on the revenues and the EBITDA of Markel Ventures is a pretty good description of how things are going there and they're going pretty well. Got it. You said it's becoming a bigger part of the income statement. It'd be great to get better disclosure around that since it's going to be growing as well. Just one quick request That's all. Second question, the amortization of the Alterra investment portfolio, which is obviously holding back GAAP investment income. Can you talk about what that number looks like going forward? The amortization number for Alterra's investment portfolio will be taken across the duration of the portfolio basically. So it's going to run for I would guess 3 or 4 years. Right. Probably look close to the same quarter over quarter although it will come down some as we sell securities. Yes. So maybe a way to think about it, I think it's roughly and help me out here guys $20,000,000 a quarter right now. Yes. The duration of the portfolio is about probably 5 years. 4 or 5 years. And so that $20,000,000 should sort of trail off over the next 4 years or so from that $20,000,000 down to nothing as that as the securities mature. It's a pretty big number. I mean, the day we bought Ultera was probably the yes, close to the probably the low for the rates and they've kind of backed up since then. So we've marked the portfolio up pretty significantly on May 1 and that's what we're amortizing through. Got it. That makes sense. The I'm sure it's in the Q and I just didn't yet. The unamortized portion what does that equal right now? I don't know. Know. I'm not sure it's in the queue, but I'm sure that's something we'd be willing to put in going forward. If it's not I don't see a big deal there. We'll get something to you Jay. That's great. Thanks. That's helpful. I'll requeue with other questions. Thank you. Thank you. The next question is from Matthew Berry of Lane 5 Capital. Please Hello, everyone. Hello. I have a couple of questions. Richie, you spoke about establishing a margin of safety for the Ultera book. I noticed that the current year loss ratio was improved quarter over quarter and there are no prior year developments in there in the Ultera segment. So could you describe how that process works? How it will evolve over time? And how it will impact the financials? Sure. Sure. Very consistent with what we've done in all past acquisitions. We have a policy or a philosophy as Markel of being more likely redundant than deficient. And when we buy companies, we sort of tread our way into that philosophy by adding a margin of safety to the current accident year. The reason for the decrease year over year was catastrophe losses in the prior year primarily. But I can assure you we did take the actuarial pick and did a very consistent methodology to add a margin of safety to the reserves in the quarter and we'll be doing that as we go forward. Margin of safety that we've added depends on the type of business that it is. And in past acquisitions, it's been anywhere from 4 points to 10 points on the business on the current accident year as we earn that business. And what I guess I'd tell you here is that somewhere in that it's in that range of what we're adding to the Ultera current accident year as it's earned onto our books. Okay. Good. And that's consistent with what I see over the long run-in terms of reserve releases and how that cycle works makes sense. And then one for Tom, which is I wouldn't in my limited experience with homebuilders describe the majority of them as profitable high return investment capital with solid management and great reinvestment opportunities. So could you describe what you see that's different at Eagle and how they run their business different from the typical homebuilder? Well, the great thing about Eagle as demonstrated by the fact that they remained profitable and as miserable an environment as you can have is that intellectual capital of the organization is really what matters. And you have people who have outstanding relationships subcontractors and a network of people who can get things done. So the size of the Eagle organization relative to what they do in terms of people that are on their payroll, it's actually relatively small. And it's like an accordion. It can expand and shrink back depending on the set of opportunities that are out there and they've successfully done it for 2 generations. So we have a lot of confidence in their ability to continue to do that. And that flexibility and frankly being part of Markel is an easy advantage for them in the sense that, when it is the appropriate time to add capital and to try to seize opportunities and push ahead, we can support that program. At the same time, when it's time to go in reverse a little bit and shrink and hunker down, that's okay, because they can redistribute that capital back to us and we'll find other ways to put it to use. If you're a standalone mono line company, you don't typically have that flexibility. Same sort of thing that we have happening in our insurance businesses where as opposed to one line of insurance we have 100 different times some of them need capital and others are generating capital within the overall corporate environment, we can put capital to good use. Okay. Thanks. Thank you very much. Thank you. Thank you. There are no further questions at this time. I would now like to turn the floor back to management for closing comments. Thank you very much. We look forward to speaking with you soon. Bye bye. This concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.