Earnings Call: Q2 2021

Jul 22, 2021

Good day, and welcome to W. R. Berkley Corporation's 2nd Quarter 2021 Earnings Call. Recorded. The speakers' remarks may contain forward looking statements. Some of the forward looking statements can be identified by the use recorded forward looking words, including, without limitations, beliefs, expects or estimates. Recorded. We caution you that such forward looking statements should not be regarded as a representation by us that the future plans, estimated or expectations contemplated by us will in fact be achieved. Please refer to our annual recorded on Form 10 ks for the year ended December 31, 2020, and our other filings made with the SEC recorded for a description of the business environment in which we operate and the important factors that may materially affect our results. Recorded. W. R. Berkley Corporation is not under any obligation and expressly disclaims any such obligation recorded to update or alter its forward looking statements whether as a result of new information, future events or otherwise. Recorded. I would now like to turn the call over to Mr. Robert Klee. Please go ahead, sir. Suzanne, thank you very much and good afternoon everyone and recorded. Again, welcome to our Q2 call. Along with me co hosting, we have our Executive Chairman, Bill Berkley as well as Rich Baio, Group recorded. We're going to follow a similar agenda to what we've done in the past, but we're in a moment or 2 going to hand it over to Rich recorded. So walk us through the quarter and focus our attention on a few highlights. And once he's through, I'm going to offer a few soundbites recorded and then we will be opening it up for Q and A. Rich, so if you would please. Great. Thanks, Rob, recorded. Good afternoon, everyone. The positive momentum continues to build in our business as evident by our growth in premium and recorded in underwriting profits as rate improvements and additional premium associated with increase in exposure earned through the income recorded. We reported a consecutive quarterly record underwriting profit in the Q2 of 2021 along with recorded. Strong net investment income resulting in an annualized return on beginning of year equity of 15%. The company reported net income of $237,000,000 or $1.27 per share. The components include operating income of recorded at $219,000,000 or $1.17 per share and after tax net investment gains of $18,000,000 for $0.10 per share. Drilling down into our quarterly underwriting performance, you will note that gross premiums written grew by $529,000,000 or 24.8 percent to almost $2,700,000,000 Net premiums written grew $472,000,000 or 27 recorded to more than $2,200,000,000 recognizing an increase in both segments. Our overall recorded. Session rate decreased in the quarter due to changes in certain underlying outward reinsurance arrangements, recorded. Moving into segment production of net premiums written, the Insurance segment grew 29.2% to almost 2% to almost $2,000,000,000 with an increase in all lines of business. Professional liability led this growth with 64.8%, followed by commercial auto of 31%, other liability of 28.7%, short tail lines of 21 0.2% and workers' compensation of 15.6%. The Reinsurance and Monoline recorded. Excess segment grew about 11% to $218,000,000 with an increase in monoline excess of 20.9 recorded and casualty reinsurance of 17.5%, partially offset by a decrease in property reinsurance of 13.8%. Recorded. Underwriting income benefited from the compounding rate improvement above loss cost trends along with growth in exposure recorded and lower claims frequency in certain lines of business. We did experience an above average level of non weather related property losses in the quarter recorded and partially offset these benefits. In addition, our current accident year catastrophe losses decreased significantly quarter over quarter from 100 and $46,000,000 or 8.7 loss ratio points in the prior year to $44,000,000 or 2.2 loss recorded in the current quarter. As a result, quarterly underwriting income increased almost 800% to a record $202,000,000 recorded. The reported loss ratio was 61% in the current quarter compared with 67.7% in 2020. Recorded. Prior year loss reserves developed favorably by about $500,000 in the current quarter. Accordingly, our current accident year loss ratio excluding recorded. The catastrophe was 58.8% compared with 59.2% for the prior year's quarter. Recorded. The continued growth in net premiums earned has benefited the expense ratio, which was 28.7% in the current quarter recorded compared with 31% a year ago. Net premiums earned outpaced underwriting expenses by a margin of more than 8.5%. Recorded. We also continue to benefit from reduced costs associated with travel and entertainment, but do anticipate some of this will be given recorded. Wrapping up the full picture, on the underwriting side, our current accident year combined ratio, recorded. Excluding catastrophes was 87.5 percent for the quarter compared with 90.2% for the prior year quarter. On the investment front, net investment income increased 96.9 percent to $168,000,000 driven by strong results in investment funds. The fixed maturity portfolio reflected a decline quarter over quarter due to the lower interest rate environment, recorded. We also continue to maintain an above average level of cash and cash equivalents as June 30, 2021, which has been decreasing over the past few quarters, where we see opportunities to invest at attractive risk adjusted returns. Recorded. Our duration remains flat at 2.4 years, while maintaining a high credit quality of AA-. Pretax net investment gains in the quarter of $24,000,000 is primarily comprised of realized gains on investments of $39,000,000 a reduction in unrealized gains on equity securities of $18,000,000 and a decrease in the allowance for expected credit losses of $3,000,000 recorded. The realized gain was largely driven by the sale of 2 real estate properties, which also resulted in the reduction in our debt that was supporting one of the real estate properties of approximately $102,000,000 Corporate expenses increased approximately 13,000,000 due to debt extinguishment costs of $8,000,000 relating to the redemption of hybrid securities on June 1st and higher incentive compensation costs as well. In addition, we announced the formation of a new operating unit in the Q2, which you may recall that such recorded. Expenses are reflected in corporate until the operation begins writing business and is then moved into the underwriting expense. Recorded. Stockholders' equity increased by $164,000,000 to approximately $6,600,000,000 in the quarter recorded after regular and special dividends of $112,000,000 Book value per share increased 2.5% in the quarter and book value per share recorded. Our earnings call is being recorded. And finally, cash flow from operations continued to be strong with approximately $700,000,000 on a year to date basis. And with that, I'll pass it back to Rob. Thank you. Recorded. Rich, thank you very much. So let me just offer a couple of quick observations and then we'll get to your Q and A and take the dialogue anywhere recorded. I think by virtually any measure, it was a great quarter for the company. And from my perspective, it's recorded. In addition to that, I think there is a growing amount of evidence recorded. Recorded. As far as drilling down into the market a little bit more, when we look at the major recorded. Product lines with the exception of workers' compensation, all of them continue to get rate increases that outpace our view of loss trend recorded and that is even as we have been factoring in a bit more for financial inflation. Regarding workers' compensation, recorded. There are again growing, but early signs that the level of erosion there is slowing. Recorded. That having been said, we also are paying close attention to wage inflation and what that may mean for the comp recorded. Rich walks you through the top line. Obviously, the 27% growth plus recorded. A couple of observations there though. One, please keep in mind if you go back and you look at 2020, We were not an organization where in Q2 of 2020 our top line fell off a cliff. We were give or take flat. So this was not just a bounce back to a normal run rate. This was a meaningful growth. Recorded. In addition to that, Rich had commented around the Excess and Reinsurance segment. You would have noted possibly in the release and also again in Rich's comments that it was the reinsurance segment where particularly our domestic treaty business where we backed away from a a couple of deals where we just felt as though while the rates were good, they weren't good enough for us to participate. Recorded. If you unpack the 27% growth overall, give or take about a third of it is coming from rate. The balance of it is coming from exposure recorded as you would have gathered from the rate increase coming in ex comp at just shy of 10%. I think it's important that people not read too deeply into as I suspect some might as to the rate increase and What does this mean relative to what the rate increase was last quarter or the same time in the prior year? Recorded. The simple fact is that when we think about our economic model, it is multidimensional. We look at the margins that are available in the business recorded. And as we become pleased with the available margins, we start to think about possibly how we reprioritize recorded. And again, as we have seen the margins in a meaningful recorded. We're still pushing for rate. We're still getting rate by and large ex comp recorded. That outpaces trend, but again growing exposure becomes even more of an recorded. To the top line, I think it's a helpful data point, particularly our specialty businesses are getting flooded with submissions. It's a comp and in particular is our E and S businesses. What's driving it? 2 things: recorded. Recorded. As far as the opening economy just bouncing back to workers' compensation, recorded. As we have expressed in the past, we are concerned with that product line and where rates have gone, but you would have seen that product line growing in our release and that is really driven by payroll growth. And again, I think it just speaks to the health and well-being of recorded. Maybe pivoting Over to the combined ratio, Rich got through a lot of this, just a couple of observations from my perspective. On the expense front, recorded. Coming in at a 28.7 from our perspective is a pretty good place with opportunity to improve from here. As Rich suggested, as our recorded. Travel and entertainment picks back up certainly some if not all of the approximately 50 basis point benefit recorded that we've been getting as far as expenses due to COVID that is likely to erode and disappear. That having been said, if you look at the recorded. The power of the earned premium coming through and how it is likely to build from here and you can see that given the written leads the earned, recorded. Loss ratio, pretty good at 61%. Recorded. The ex cat accident year as Rich mentioned was the 58.8. He talked about non cat recorded. That added relative to where it was running last year about a little over 2 points. So this was recorded. Quite frankly, we had a rash of fires. Some would suggest it's bad luck. We tend to believe that oftentimes You make your own luck. So we're digging into that to make sure that this is not a new normal and it was more of a one time unfortunate series of events. Recorded. Another data point on the loss ratio front, the paid loss ratio came in at a very attractive 44.3. Recorded. A couple of comments on the investment portfolio. Again, Rich commented on the duration of the 2.4 years. Recorded. The book yield is running coincidentally at about 2.4 as well. Recorded. We continue to be very focused on inflation. From our perspective, inflation is very much here. Recorded. There are some people that talked about it being this transient. That may be true. I'm not quite sure when people recorded. We'll talk about transient well, how long is transient regardless the cost of things are up today. But recorded. Even if you saw inflation return to a 2.5% or 3% level, we continue to believe that a 10 year at recorded. 130 or less doesn't make a whole lot of sense for the long run. One other recorded. Just related to the balance sheet and the capital structure and we can get into this during the Q and A if people are interested. We've done a fair amount of work in restructuring certain things per one of Rich's comments around the prepayment or the calling of certain recorded. But as you think about again the earnings power of the business later this year, but even more So for 2022 and 2023, there is very meaningful benefit that will be coming through, again, savings around capital costs. So long story short, very good quarter. And I think what's more encouraging than even just the results is If you look at how the table is set for what is likely not just to be the next couple of quarters, but quite frankly the next couple of years, recorded. This is an organization that is going to benefit greatly from the broader macro conditions. Recorded. Our first question comes from the line of Elyse Greenspan from Wells Fargo. Recorded. Good afternoon. Hi, thanks. Good afternoon as well. My first question, I want recorded. I'd like to drill down into some of what you said in your introductory comments. You guys said that you're factoring in a bit more for financial inflation. Can you just expand on that and what changed in terms of your loss trend assumptions in the current quarter? So recorded. We are constantly visiting and revisiting our loss picks and trying to refine them based on all the available information at any moment in time. I think from our perspective, it's pretty apparent that there is recorded. And we have more financial inflation in the system today, if you will, than there was a year ago. And as we think about our loss costs, for example, in the property line, the cost of building materials recorded or the cost of auto parts or other things like that, one needs to appropriately factor in the financial inflation and what that means recorded. Can you give us a sense of just the magnitude of the movement you guys saw recorded relative to your last call. Generally speaking, Elyse, we don't dissect our loss picks to that extent. But certainly, I can assure you that when we have factored it in, it has led us to raise some of our picks from what we have been using in the past. Okay. And then my second question on you guys also going back to some of your remarks, the expense ratio 28.7 in the quarter. I know you said that there was 50 basis points from COVID, but it sounds like given the fact that there's a lot of leverage recorded to the top line growth that perhaps this could be kind of the new run rate expense ratio both when we still see some pandemic savings and even when we recorded with COVID that you could be within range of a 28.7%. Can you just help us think through kind of the run rate for the expense ratio? Sure. So what I would suggest you do is if you sort of add back in the 50 basis points for COVID, recorded. Then you look at the momentum behind our earned premium in part by looking at recorded and how that's going to come through. And while yes, some of that expense is variable, commissions, boards, bureaus and so on, recorded. A meaningful amount of our expenses is somewhat fixed. And to Rich's point earlier, I think that recorded. That will certainly offset and probably then some, the COVID component recorded not being part of the business hopefully going forward because everyone is back to a more traditional way of operating. Recorded. Okay. Thanks for the color. Our next question comes from the line of Michael Phillips from Morgan Stanley. Your line is now open. Hi, Michael. Good afternoon. Hey, good afternoon, Rob. Thanks. Two questions. First question On the loss ratio ex cat and the COVID, for this quarter in insurance, it looks like it's flat compared to last year. And I think, and it's where I kind of want to get recorded. I think last year you had some frequency benefit. So maybe this quarter actually did improve in insurance. And can you remind us we're talking about that? Recorded. Sorry, Michael, could you repeat the question? You broke up a little bit. Sure. I apologize. Yes, yes. So the insurance recorded. Loss ratio ex cat and COVID impacts, it looks like the loss ratio there backing that out was flat year over year recorded. But I think that you had some frequency benefits also that made 2Q 'twenty a little bit tougher of a comp as it was the wrong number. So recorded. I wanted to see if that was the case and clarify that. So actually this quarter did improve in insurance. Yes. I'll give you my 2¢ and Rich may have Some thoughts to add to it. I think the biggest piece was the comment that both Rich and I made around non cat property related losses being a bit more challenging in Q2 'one than what we saw last year. Recorded. And I think that would be a leading factor. And again, that was primarily fire. Rich, do you have any further thoughts on that? Recorded. That's spot on, Rob. That's exactly right. So I don't have any additional thoughts. Okay. So I was getting to maybe there was something last year that Kind of dropped that loss ratio, but maybe not. So it's more just elevated this year from what you said. So, okay, that's helpful. Recorded. Second question, Rob, did you approach the I guess the way you set reserves, the philosophy behind how you set reserves for axonere 'twenty Given all that was going on last year, any differently than you otherwise do in your reserve and practices? Recorded. Certainly, all of us, we as a team took note of the impact of COVID on multiple levels, some of it to that was helpful, some of it was not helpful. But despite the big piece that perhaps you're referring to recorded. And there were many product lines that benefited from COVID as it relates to frequency. Recorded. And how we have thought about it, first off, we recognize that that is not the new normal and we're seeing frequency trend virtually across the board returning to a more traditional norm. And second of all, as far as what I would define as a unique situation in 2020 and recorded. Some one time benefits that came out on the frequency assumption. Recorded. We have recognized some of that, but I think as we mentioned last quarter, we're reluctant to declare recorded. And outcome prematurely, because there are certain things you can conclude that they're done and there are other things it's hard to know whether there's just recorded. Okay, that's helpful. I guess the reason I was recorded. I think it's no secret that there's probably some cushion in the industry numbers. I'm not going to ask you about yours, but the industry numbers because of 2020 accident. I guess what I was getting at is, do you think there's any impact of that on the overall pricing cycle because of what may be more of a cushion because of COVID reserves? I think that different organizations have chosen to recognize that cushion at a different pace. I think a lot of that cushion came recorded primarily in the shorter tail lines, which would have been recognized sooner rather than later. And fundamentally, I think a lot of the drivers recorded that are pushing this market to continue to firm are coming about as a result of other things. Recorded. Thank you, Rob. Appreciate it. I think that question is going to impact the direction or the momentum that exists. Recorded. Thanks so much. Our next question comes from the line of Ryan Tunis from Autonomous Research. Recorded. Your line is now open. Good afternoon, Ryan. Hey, good evening, Rob. So a question on some of the recorded. Growth obviously strong. When you see that coming back and kind of the pivot toward the growth, does that change how you recorded. See the loss ratio progressing maybe looking out over the next year relative to what you might have thought 6 months ago? Recorded. From our perspective, again, nobody knows exactly what tomorrow will bring or there's always the unforeseen event. Recorded. But when we look at the data points, you can see rate continuing to outpace our view on trends by and large. In addition to that, when you do the math, recorded. One needs to factor in the impact of terms and conditions, particularly in the E and S space as well as on the facultative front recorded and even in this broader specialty space. So when I think about it, I think that there is further opportunity from here for things to improve. And again, we have a view that our rate increases on a written basis and on an earned basis We'll continue for some period of time outpacing trend. Got it. And then my follow-up, recorded. I guess, just to make a little bit of a reminder, obviously, Berkeley has a lot of the individual underwriting entities. I know recorded. These are pretty decentralized generally. So does it work in such a way that those entities are kind of reporting up loss ratios to you guys And you're kind of counting up the picks or to what extent centrally Are you guys able to kind of actually have control of the assumptions that go into like underlying loss ratios? Recorded. Yes. So at the heart of our model, it's not an us and them, so to speak, a model. It's much more of a collaborative one. So things such as loss ticks using that as an example, that is certainly something that is a collaborative effort amongst really driven very much by the colleagues in the field. At the same time, it is collaborative with us here. And recorded. We work together and we try and make sure that we're looking at it, if you will, a more local granular level. At the same time, we want to make sure that we're getting recorded. So it's not one or the other. It is really recorded. A team effort from my perspective and there's a what I would define as a very healthy give and take. Understood. Thanks. Recorded. Our next question comes from the line of Josh Shanker from Bank of America. Your line is now open. Great. Thank you. Recorded. Good. Good. So please don't get angry. I got a tough question, but I'm sure you have a great answer. I look at you guys as recorded. We recognize bad news quickly and good news. We've got sort of, recorded. I guess, incubate for a number of years before putting it in the numbers. I was just looking through the recorded. And it seems like you guys have been releasing reserves in workers' comp for recent accident years. I'm sure there's a great reason for it. I know that you guys recorded. It usually sit on reserves even if things are producing favorable in a long term line for a number of years until you do that with confidence. So I was hoping that you might be able to So Josh, let me say it back to you because the line isn't great and I want to make sure that I understood your question. Recorded. You're making an observation around how what our loss reserve development has been in the workers' comp line and philosophically how we think about that? Recorded. I was looking through the Schedule P and I see recent accident years and workers' comp are throwing off favorable development. And I imagine you guys would long tailwind like workers' comp traditionally you would sit on those reserves for a few years before making any changes. Recorded. Well, I think the answer to the question and again, we're happy to get into a more granular discussion recorded. We are looking at our picks and we're looking at historical data and we are looking at both frequency and we're looking at severity and we are trying to adjust appropriately. I I think we tend to be particularly cautious early on out of the gates. And then, of course, recorded. As it seasons, we will respond. But again, I don't have the P in front of me, so I would be reluctant to try and get into a more granular recorded. But if you'd like to take it up offline, we would be pleased to do that with you or one of your colleagues, whatever would be most convenient for you all. Recorded. Happy to do that. And the other question I had was about the arbitrage market. You guys let that fund get bigger, sometimes get smaller. What's your outlook right now given where the market is and the opportunities there is? Will you be allocating more capital or less capital in the future to that I think we take it one day at a time. We have some extraordinarily skilled colleagues that run that business and we have no shortage of cash as you would see from our balance sheet. So while it's been pretty steady, if they see more opportunity, we're certainly in a position to provide them more capital to manage. Recorded. Okay. Thank you very much. Our next question comes from the line of Meyer Shields from Keith, Burette and Woods. Your line is open. Hi. Good afternoon. Thanks for calling. Hi. How are you Rob? No, my pleasure. Recorded. So two quick questions. I think if I understand your response to Elyse correctly, you're talking about tweaking up some loss picks recorded because of higher financial inflation. But if we take out the non cat weather in the quarter, it looks like the underlying accident year loss ratio was better recorded. So I feel like I'm missing something there. Well, I think recorded. Obviously, we're in an industry where the you price your product before you fully know your cost of goods sold. And when we are thinking about the impacts of financial inflation and what that may mean for our claims costs in the future, We're trying to make sure that we appropriately factor that in. I think if you're like me and you show up at Home Depot once a month, you'll notice A lot of the stuff you buy there is considerably more expensive than it was a year ago. So we're just trying to make Sure that we are appropriately adjusting for the shift in a lot of commodity pricing and the shift in a lot of costs recorded. Okay. The examples you gave for the financial inflation All seems focused on short tail lines. Are you seeing similar worsening inflation on liability or the longer tail lines? Recorded. Not as visibly as the shorter tail lines, just using a pretty broad brush. I would we'll have recorded. We'll see the impact over time. Obviously, there can be an impact on things, on certain things. But for us on the liability side, It tends to continue to be more of a social inflation discussion. Okay, perfect. And then one last question, if I can. I assume that some of the employment costs you have are fixed costs. Is inflation there getting any worse? Recorded. I think generally speaking, there is wage inflation throughout the country recorded. And there's likely to be more of that for at least the short term. We'll have to see what it means over time. Recorded. Okay, perfect. Thank you so much. Thank you for your questions. Recorded. Our next question comes from the line of Brian Meredith from UBS. Your line is open. Hey, good morning, Brian. Good, good, good. Recorded. Couple of quick ones here. The first one, just back to the fire loss you had in the quarter. I imagine you expect some level of fire losses every quarter, right? And I'm just curious, kind of is there a kind of is it above a baseline? It was last year's fire losses recorded. Abnormally low, just trying to kind of establish kind of what a good baseline is here right now for the underlying loss ratio? Recorded. It was a series of losses. It wasn't just one loss. And I would tell you recorded. I don't have the numbers in front of me. Richie, I would say it's a little bit of both of what Brian referenced. I think Last year was a little on the lighter side. This year was particularly heavy and run rate is probably somewhere in between the bookend. So I think recorded. The 2.4 over last year, I'd say 1 point, 0.5, I'd put back in. What's your thought on that? Yes, I think That's right. I would agree with them. Perfect. That's helpful. And then another one just quickly on the underlying loss ratios. And you're growing your cash flow book pretty quickly right now. Is that mix of business going to kind of have some effect here going forward as we kind of looked at recorded. The combined ratio or the loss ratio, just because some of the casualty lines probably carry a little bit higher underlying loss ratio? Recorded. I think that it is going to prove over time that the margin in the business that we are writing is very recorded. Okay, great. And then my last question, I'm just curious, you said you're concerned about wage inflation with respect to workers' recorded. But don't you actually get premium for any type of payroll, isn't that based on payroll? So why would it be a concern? Thanks for raising that, Brian. I may have mischaracterized it or misspoke. Actually, it's the other way around. Recorded. So, when as you've had to listen to us whine for the past several quarters about the workers' comp line recorded. And how even though frequency may be the industry's friend and certainly it was the industry's friend recorded. During COVID, we continue to be focused on the severity component and we are meaningfully concerned about that for the industry, which has led to some of the commentary you heard. When you come up with a loss recorded. For workers' comp, obviously, there are a variety of components. One of the components is the medical trend So when you think about the exposure, you make certain assumptions around payrolls. Recorded. And to the extent that payroll or wage inflation is driving payrolls up more and And perhaps medical inflation is going up, but not going up by as or is not keeping up with the wage inflation recorded. Our next question comes from the line of Mark Dwelle from RBC. Your line is now open. Recorded. Yes, good afternoon. Let me start with just a small numbers question. Was there in fact recorded. Any COVID expense within the catastrophe, the $44,000,000 a catastrophe that you had this quarter or is that recorded. You're no longer booking anything. There was a relatively modest sum. Rich, do you recall how much it was? Recorded. Yes. We had about 1.2 loss ratio points embedded in the current accident year cat losses for COVID. Recorded. So just under $25,000,000 Okay. That's helpful. Thank you. And then the second question, recorded. Well, I'm tempted to ask you what the last thing you bought at Home Depot was. What I'll actually ask you is, in terms of competition across recorded. Are you still seeing primarily rational competitive behavior? Or are you seeing any signs recorded around the edges of, call, aggressive competition or price oriented competition recorded. Like you would typically see perhaps near peaks of a pricing cycle. There is nothing that leads us to believe let's put workers' comp aside for the moment. There is nothing that leads us to believe that the opportunities in virtually every other product line recorded. We continue to see the opportunity to push rates further. Recorded. And quite frankly, we're seeing the standard market continue to push business out recorded. So we remain very encouraged by and large as it relates to the recorded. No, we do not think that this marketplace has peaked in any way shape or form quite to the contrary. Recorded. Workers' comp again being the one outlier, are we seeing the rate decreases depending on the state slowing a little bit? Recorded. Yes, there is signs of that. At the same time, it has been surprising to us recorded. There are certain markets that are becoming exceptionally aggressive with things such as commissions. Recorded. And quite frankly, we just shake our heads. We've kind of seen the movie before. We know how it ends and it's usually a sign that we're recorded. There are no further questions at this time. Please continue. Okay. Suzanne, thank you. So we A, first of all, thank you all very much for recorded. As you would have gathered, not only was it a strong quarter, but we're very optimistic about where things are going for the next couple of years. Recorded. From our perspective, the table is set for some pretty terrific returns and we will recorded. Look forward to enjoying those again over the next couple of years. So we will update you again in about 90 days. Thank you for your time. Recorded. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.