Employers Holdings, Inc. (EIG) Q4 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Q4 2012 Employers Holdings, Inc. Earnings Conference Call. My name is Stephanie, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Vicki Ericsson Mills, Vice President, Investor Relations. Please proceed, ma'am.

Thank you, Catherine, and welcome, everyone, to the fourth quarter and full year 2012 earnings call for Employers. Yesterday, we announced our earnings results, and we expect to file our Form 10-K with the Securities and Exchange Commission tomorrow. Our press release and Form 10-K may be accessed on the company's website at employers.com and are accessible through the Investors link. Today's call is being recorded and webcast from the Investor Relations section of our website, where a replay will be available following the call. With me today on the call are Doug Dirks, our Chief Executive Officer; and Ric Yocke, our Chief Financial Officer. Statements made during this conference call that are not based on historical fact are considered forward-looking statements. These statements are made in reliance on the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations expressed in our forward-looking statements are reasonable, risks and uncertainties could cause actual results to be materially different from our expectations, including the risks set forth in our filings with the Securities and Exchange Commission. All remarks made during the call are current at the time of the call and will not be updated to reflect subsequent developments. We have changed the components of the non-GAAP metric that excludes the impact of the deferred gain from the 1999 Loss Portfolio Transfer, or LPT. This metric is defined in our earnings press release available on our website. Please see the earnings announcement for the new definition and the reconciliation of results which illustrate the impact of the LPT Agreement adjustments made in the fourth quarter and the change in deferred acquisition cost accounting implemented by the Financial Accounting Standards Board beginning in 2012. A list of our portfolio securities by CUSIP is available in the Investors section of our website under Calendar of Events, Fourth Quarter Earnings Call. Now, I will turn the call over to Doug.

Thank you, Vicki. Welcome, everyone, and thank you for joining us today. I'm going to begin this morning by briefly noting the 3 elements that significantly impacted our financial results in the fourth quarter of 2012, resulting in record quarterly GAAP net income and earnings per share. All of these items relate to the Loss Portfolio Transfer. And as a reminder, the LPT Agreement is a retroactive 100% quota share reinsurance agreement with 3 reinsurers, which was effective as of June 30, 1999, for claims dated June 30, 1995 and prior. Under the agreement, $1.5 billion in liabilities were transferred for a onetime fixed cash consideration of $775 million, resulting in a gain of $750 million. Under GAAP, the recognition of the gain has been deferred and is recognized as the LPT covered claims are paid. We expect that in the normal course, these LPT claims will suddenly close over approximately a 60-year period. We also are entitled to a contingent profit commission, the amount of which is based on favorable differences between actual and expected claims payments under the LPT Agreement for the first 25 years, or until June 30, 2024. Let's review the 3 LPT-related elements in the financial statements for the fourth quarter. First, amortization of the deferred gain for LPT losses is being calculated in the same manner as always, based on actual claims payments compared to expected losses. Second, expected losses related to the LPT were decreased by $100 million in the fourth quarter of 2012. The reduction is due to changes in paid claims patterns we have observed in several recent periods that we believe will lead to a lower ultimate loss for the LPT claim. The reduction in the expected loss results in a decrease in the gain from the LPT, and in the fourth quarter of 2012, caused a decrease in the deferred gain and an increase in equity. We recalculated the deferred gain and accumulated amortization on the gain to reflect what both balances would have been had the current expected ultimate losses been the loss estimate at June 30, 1999. Finally, the third element related to the LPT in the fourth quarter 2012 was a change in the manner in which we account for the contingent profit commission. Previously, and since 2002, we have accounted for paid and accrued contingent profit commission as a reduction in commission expense in the period the payment or accrual occurred. Under our restated accounting practice, we now treat the contingent profit commission as a reduction in the premium paid at the onset of the LPT Agreement, thereby reducing the consideration paid for the agreement and consequently increasing the deferred gain. We will continue to amortize any gain related to the contingent profit commission over the first 25 years of the LPT Agreement or until June 30, 2024. Currently, a gain related to the contingent profit commission of approximately $44 million is being amortized in income over that 25-year period. In our Form 10-K, you will now see 2 separate line items, which disclose LPT amortization, one related to losses, and one related to contingent profit commission. As a result of the change, we have, in the 2012 Form 10-K, restated amounts in 2010, 2011 and 2012 to reflect what the income statements and balance sheets would have been had the accounting approach we are now following been adopted at the beginning of the LPT Agreement in 1999. The results of this restatement were to increase basic earnings per share by $0.01 in 2010 and no change in 2011. Diluted earnings per share increased $0.02 in 2010 and $0.01 in 2011. Our earnings announcement was released yesterday and contains detailed reconciliations of key financial measures. I recommend you review that document, as well as our Form 10-K, which we expect to file tomorrow. Let me now address our operating results. Our focus in 2012 was to execute our growth and pricing strategies in order to improve our underwriting profitability and to take advantage of expected improvements in market conditions. We are encouraged by the continuing improvement we see in the market, both in terms of losses and rate improvement and are satisfied with our performance in the fourth quarter and full year 2012 given those market conditions. In the year and the quarter, we again increased our revenue, decreased our combined ratio and increased book value per share. In the fourth quarter of 2012, revenue increased 15% compared to the fourth quarter of 2011, driven by a policy count increase of 32%. In 2012, we added 19,121 policies while retention remained at high levels. In the fourth quarter of 2012, retention was 88% compared with 87% in the fourth quarter of 2011. Our strategic partner business, representing approximately 1/4 of our book, demonstrated a stable retention rate of 91% in the fourth quarter. Our overall net rate increased 8.3% year-over-year at the end of the fourth quarter, up significantly from the increases of 0.6%, 3.8% and 7.4% for the first, second and third quarters of 2012, respectively. This is the fourth consecutive quarter for which overall net rate has increased year-over-year, evidencing the continuing improvement in pricing in our market. Our planned transition to more low hazard small business, principally in our Eastern states, has substantially been completed. Consequently, the impact that transition had on average policy size and average rate has subsided. Importantly, year-over-year change in net rate in 2012 was positive in each of our top 5 states: California, Illinois, Georgia, Florida and Nevada, which combined, represented 75% of our in-force premium. We continue to increase premium and scale in the quarter. Consequently, the underwriting expense ratio improved 1.8 points in the fourth quarter year-over-year. The overall combined ratio improved 2.9 points in the fourth quarter year-over-year. To support our growth in policies and premium, we contributed $70 million in cash to our operating companies in September. We will continue to evaluate capital requirements in terms of capital adequacy and financial strength ratings to support our A- excellent rating from A.M. Best and to allow us to take the fullest advantage of improving market conditions. Approximately $51.2 million of the currently authorized share repurchase program remains in place. Since the inception of the 2011 share repurchase program, we have repurchased 9.4 million common shares at a cost of $148.8 million, with 22,824 shares repurchased in the fourth quarter at a cost of $17.95 per share. Going forward, the timing and actual number of additional shares we repurchased under this authorization, which expires June 30, 2013, will depend on a variety of factors including share price, corporate and regulatory capital requirements and other market and economic conditions. And with that, I'll turn the call over to Rick for a further discussion of our financial results. Rick?

Thank you, Doug. I'll begin by adding some comments concerning the favorable development in our LPT-ceded reserves. After we reduced the estimated reserves by $100 million at the end of the fourth quarter in 2012, the remaining unpaid ceded reserves related to the LPT claims totaled $672 million. This change in estimate resulted in a net $73.3 million cumulative adjustment to the deferred reinsurance gain to reflect the balance that would have existed had the revised reserves been recognized at the inception of the LPT Agreement on June 30, 1999. The change in estimate also increased net income by $73.3 million in the reporting period, or $2.31 per share on a fully diluted basis in the full year and $2.35 per share on a fully diluted basis in the fourth quarter. As Doug mentioned, this is the first adjustment of the LPT-ceded reserves that we've made as a public company. So why did we make this adjustment now? Our monitoring of the LPT involves tracking actual paid losses in each quarter against the implied or expected paid losses. For a number of quarters, the actual paid LPT losses have been less than expected, with significant variances in the last 3 quarters. These continuing observations were compelling evidence that the reserves were not likely to return to expected levels. Therefore, a favorable adjustment of $100 million was determined to be appropriate. The fourth quarter was also impacted by an adjustment in the LPT contingent profit commission, which reduced our losses in LAE by $8.6 million, resulting in an increase to net income of $8.2 million or $0.26 per share. Excluding the LPT adjustments related to the deferred reinsurance gain, our combined ratio was 112.5 in the fourth quarter, a 2.9% improvement compared to the fourth quarter in 2011. The increase was primarily related to an improvement in the underwriting and other operating expense ratio. The underwriting and other operating expense ratio declined 1.8 points in the fourth quarter year-over-year, largely due to the increase in net premiums earned in our previously implemented cost controls. There was a $7 million increase in underwriting and other operating expenses in the fourth quarter. This year-over-year increase was largely attributable to a $5 million increase in equity and incentive compensation-related expenses and a $1.9 million increase in premium taxes and assessments. While staffing at year-end 2012 remained flat relative to the prior year, accruals for equity and incentive pay increased year-over-year in the fourth quarter as incentives are based on actual operating performance assessed as of year end. The loss ratio before the LPT improved slightly year-over-year. Our provision rate for current accident year losses in the fourth quarter of this year was 76.8%, compared with 77.1% in the fourth quarter of 2011. If rate trends continue to exceed loss trends, we will lower our provision rate in the first quarter. We will provide no guidance around what that rate will be in the next quarter or for the full year 2013. Our analysis of total reserves for prior periods continue to show modest adverse development for recent accident years, primarily 2008 through 2011, offset by aggregate favorable development in accident years preceding 2008. Overall estimate of reserves remained adequate. Net investment income in the fourth quarter declined to $18.2 million from $19.7 million in the fourth quarter of 2011 due to a slight decrease in yield. Our investment portfolio continued to perform well despite historically low yields. The average book yield of the portfolio was 3.7%, and the tax equivalent yield was 4.4% at the end of the fourth quarter. The duration of fixed maturities in the portfolio was relatively short at 4.2%. The portfolio was weighted towards short- and intermediate-term bonds to minimize interest rate risk. However, our investment strategy balances consideration of duration, yield and credit risk. Equities represented 5.8% of our total portfolio at the end of the fourth quarter. With that, I'll turn it back to Doug.

Thanks, Rick. Our growth in policies and premium over the past 2 years has been substantial. We believe that growth in policies and premium will continue throughout 2013, but at a slower rate of increase than we have seen in recent reporting periods. Our focus will continue to be on retaining our highest quality and best priced business, adding appropriately new -- appropriately priced new business and building our small business brand across the country. Before we begin our Q&A, it is with great pleasure and pride that I note that this year, 2013, is a major milestone for Employers. As of this year, with our history as the state fund, we have been doing business as a workers' compensation specialist for 100 years. While we have only been a public company for a little more than 6 years, in that time and during one of the most challenging operating environments for our industry, we have succeeded in growing our adjusted book value over 75% since year-end 2006. We remain committed to creating long-term value for our shareholders, and we look forward to providing high-quality services and competitively priced products to our policyholders for many years to come. With that, operator, we'll now take questions.

[Operator Instructions] Your first question comes from the line of Mark Hughes from SunTrust.

The pace of rate hikes in the quarter, obviously, a very strong year-over-year, the incremental improvement off of your Q3 gain was a little more modest than what you saw between Q2 and Q3. Was there any deliberate strategy? Was it a different mix perhaps in this quarter? Just after a very sharp gain in 3Q and more modest increase this quarter, I was just wondering if there was anything behind that.

Mark, there are a number of things that could influence that, and certainly to small degrees, mix in business and what portion of the book might be renewing in a particular quarter could have an impact. But if you look at the actions we took, there were a number of increases in filed rates around the country beginning October 1. So some of that is starting to build now into that fourth quarter. Additionally, we took some filed rate actions at January 1. And so there is built in now, rate strengthening for the balance of the year. But that is just a starting point. The filed rates is where you begin, but also, there are a number of actions we've taken around scheduled credits where we are trying to take advantage of the opportunity that's presented as the market begins to firm up.

Okay. The -- when you look at the -- your new distribution that's been helping drive this very good top line growth, I think -- am I right in assuming you're relatively conservative in your -- setting your loss picks on that business? Now that you've been at this for a couple of years, any observations about how those losses are developing, what it might imply for loss ratios going forward?

As we began the growth strategy back in June of 2010, key to that strategy was growing within the classes of business of that we already did -- that we were already offering because we had a high confidence that was business that performed better than industry averages. And so it wasn't that we were going to grow by attempting to do something new or different. It was to do more of what we were already doing. And so consequently, we have not been surprised by the loss results. It was a very focused strategy. Where I expect to see improvement in the loss results on that book now is through rate improvement and through, perhaps, more stability in the loss environment now than we've seen in previous years.

Can you talk about that, what you're seeing in terms of claims, what's driving that, how sustainable is the trend?

Well, let's start with California because, obviously, that's our largest market. We are seeing some moderation in California, some of the things we observed over the last several years, that was the increase in cumulative trauma. There were claims around sexual dysfunction, those types of add-ons to claims. Some of that has been addressed now legislatively in California. Some of it has just appears to be abating as the economy improves and the employment situation improves. I would be reluctant to predict what the trend is on that. Certainly, we are hopeful that as the reforms in California start to take hold, that the loss environment there will improve. But we don't expect to really be able to see much from that until we get into 2014. Around the balance of the country, rate loss trends have been relatively stable. There hasn't been a lot changing around the country.

And then a final question, the -- in accounting for the LPT going forward, do we assume a similar sort of gain every quarter just off of a reduced base? Is that the right way to look at it?

Yes, as we've indicated that the payment of those LPT claims doesn't vary that much, we did see, as Rick observed, the step-down in the amount being paid over several quarters, which ultimately led us to take down the reserve by $100 million. But structurally, the payout of the LPT claims is fairly normal. And it will just decline over time as those claims close out and as the losses fall. In terms of the contingent profit commission, currently, that is at $44 million over the life of the agreement, and that one's a little bit more difficult to model because whereas the loss side is related to claims payments, the contingent profit commission is related to the timing and amounts of payments relative to an expected timing and amount of payment. So that one is a little bit more difficult to model, but I don't expect that you would see much volatility in that number going forward.

The next question comes from the line of Amit Kumar from Macquarie Capital.

May we just -- sticking on with the LPT that Rick was talking about, meaningful variances in the past 3 quarters. Can you just sort of maybe expand on that comment a bit more? Maybe give us some sort of on a relative percentages or points, would that be possible?

I don't have, Amit, readily available percentage variance, if you will, between the actual payments and the expected payments that we were seeing over those quarters. What I would just say that we had seen a number of quarters where the actuals were significantly below expected. That was continuing, it had gotten slightly larger. And looking out prospectively, we didn't see where there was evidence that those claims would return to expected levels and that an adjustment was appropriate. Now what we're -- I would say that in general, just a rough estimate is, the variances were about 10%.

Got it. And again, this is pre-1995 business, right?

That's right.

So I mean what did suddenly change in the past 3 quarters?

Well, I don't, again, have a breakdown of the rationale of why the payments have dropped off. But for example, mortality impacts us. I mean if the injured parties pass away, there are no claim payments. So impacts -- the variances in mortality assumptions can greatly impact these payments.

Do you think it would be possible to present some sort of a schedule in the 10-K which shows, again, like maybe a bit more breakdown in terms of the pool, which is in -- which is behind the LPT? Do think that data would be available? I guess what I'm trying to figure out is, if there is a meaningful change, right, and you have $672 million remaining, is the next change in 2020? Or is this something we should be thinking about, not to the same level, but something we should be thinking about for every year end?

Let me answer that question, Kumar, and then I'm going to pull it back a step. We have modeled what we expect to pay out of these claims to be over approximately the next 35 years. I would be reluctant to hold that out as the definitive payout pattern because there will be some volatility, and I expect increasing volatility as we go from 3,000-or-so claims today down to 2,000 and then 1,000. A small variance in one individual claim will have an increasing impact on what's outstanding reserves as we go, as we approach the end of this 35 years from now. But let me take the step back now. We -- this agreement is a $2 billion cover. So to the extent that there are changes in our assumptions about what the losses are going to be, has an impact on the amortization of that gain, but it in no way changes the economics of the transaction. It is purely a timing difference related to the accounting. And that's why when you look at our 10-K and our 10-Qs, we have our supplemental disclosure so that you actually can see what is the pure GAAP and the adjusted GAAP result. And to the extent that we make these changes, it will be evidenced in that difference. But again, I would be reluctant to lay out an expected payment pattern over the next 35 years. We calculate that because we have to. It is part of our financial statement. But I would be very reluctant to have anyone measuring quarter-to-quarter against that because it truly doesn't impact our adjusted performance.

Absolutely. They're excluded. 2 other questions, if I may. You mentioned modest adverse development in 2008 through 2011. And I know, again, this is a not meaningful number, it's a very small number. But can you sort of expand on that?

I would say that in the years 2008 through 2011, Amit, the total movement net in those years was like $1.5 million.

Yes, yes. But I mean, no, I'm not talking about the number. But there was nothing -- it's just noise, essentially, right?

It's just noise.

Okay. No, that's helpful. The final question is, going back to the discussion on the top line and growth expectations and I know you spent a lot of time, I'm not looking for specific guidance, just sort of going back to what you had said at the time of the A.M. Best press release, I mean when you say that it will be slower going forward, in the past, you had said that your strategic plan was to recover in excess of a 30% decline in NPW [ph] since 2008. I mean when we look forward from here, are we talking about a number in single digits, maybe modestly in double digits? Maybe just talk about where do you see things from here now that you have recovered meaningfully?

Yes. Without providing specific guidance on that, Amit, part of it will be a function of the competitiveness of the market. I have no expectation that we will continue to grow it at 35% rates that we've put up in the past. We achieved our objective of regaining, as you've indicated, regaining that critical mass that we gave up during the soft part of the cycle. Now that we're in improving conditions, we want to take full advantage of that opportunity. So it won't be 35%. I would expect that will be in excess of what the P&C market generally is producing because of the strength we're seeing in the comp line right now. Again, if I go back to my earlier comments, our focus is to retain our best priced, best performing business, and to the extent that we want to grow and will grow in terms of new business, we have higher pricing expectations today than we had 2 years ago because we think, given the market conditions, we should demand that. And in fact, we're getting it. Although, what we're seeing in the market right now is that there is still price sensitivity. So when I hear others talk about how hard the market is, trust me, we are not in a hard market. We are in a hardening market, and it is transitional. So we will try to take full advantage of that opportunity, but it is a competitive market. And we note that as we try to push rates upwards, there is a limit to how much we're able to get. This is not a seller's market yet and it remains competitive. And we're going to get the most and best price we can, and to the extent that our hit ratios fall or our retention rate falls, it's because we're being pretty demanding in terms of pricing.

Got it. And just maybe this is somewhat intertwined with what Mark asking previously, you briefly mentioned the rate filings, but you didn't expand on that. Can you just -- and this is the final question. Can you just remind us how many of the rate filings are in the pipeline and maybe the timeframe when they will come online?

There's not a lot immediately in the pipeline. Let me start with California. We haven't done a rate filing in California in a while. But as you well know, in California, the rate filing, very much, is just a starting point, and that a lot of the ultimate pricing in California is based around what's done with credits. And so we find that we have an approach and a system that's flexible enough that we can pursue rate without having to make our change in the rate filing. And so that's something we'll be focused on. Some of the changes earlier last year, or latter part of the last year or early part of this year had to do with things like loss cost multipliers and minimum premiums. And unquestionably, as we looked at our January results, those did have an impact on hit ratios. We continue to see a very strong submittal rate. We're seeing record levels of submittals in the market right now. And it's nice to have a lot of business to look at. I think the thing that's important to focus on is that as we move into a hardening market, carriers don't get rid of their best business first. They get rid of their worst business first. So we think you have to be extremely cautious in this part of the cycle with how you're quoting business. And frankly, if you're seeing your hit ratios go up and your retention rates go up, it may be because you're underpricing the worst business that's being presented to the market. So we're exercising extreme caution. Even though there's tremendous opportunity, is not a time not to exercise caution.

[Operator Instructions] The next question is from the line of Robert Roell, Surveyor Capital.

Just a couple of questions, one clarifying the ongoing amortization of the deferred gains. So you had been running, I think, around $3.5 million, $4 million a quarter of amortization of deferred gain, LPT deferred gain. And I'm just wondering, prior to the unlock of -- or the favorable development that you've taken this quarter, was there some portion of that $3 million to $4 million that was kind of favorable development on an ongoing basis? And will there be some step down in that recognition going forward as we've kind of accelerated with a big change in deferred gain this quarter?

The math of the amortization in the past has always been taking the actual payments in the quarter compared to the ultimate total payments expected under the LPT. So it is, in that sense, self-correcting as it goes along. So for example, it's not that I'm making some estimate of the paid amount that occurs in the quarter, I'm taking the actual payments and comparing it against what I expect to be the total payments under the LPT. It's that cost recovery formula that is applied to the gain that amortizes the gain over time.

Okay. But in the past, as the gain has been amortization, the benefit quarterly has declined. And so, I guess, what the question I'm asking is, do you expect, because you've accelerated recognition, do you expect that the quarterly run rate will decline on a forward basis?

If payments continue to drop or as payments continue to drop, that formula will change.

The answer is, with a declining -- with the declining number of claims, declining payment of claims, the amortization naturally falls over time.

Okay. Okay. And then, Doug, can you just comment on capital again and what's the negative outlook put on by A.M. Best? And I mean, I know you're talking about slowing it down, but company's grown very fast in recent years and grown at a combined ratio north of 100. You just put $70 million down. You still have cash at the holding company. What are the expectations around what is required to stabilize the outlook against the current backdrop of your growth plans?

Let me talk a little bit about our expectations. We put the $70 million down last year. We knew capital contributions would be required to support the growth plan, and so we weren't surprised by that. We think we're in a market environment now where growth is desirable. We see continuing improvement in our combined ratio quarter-over-quarter-over-quarter in a much more encouraging rate environment today than we've had previously. We will monitor the capital requirements required by the rating agency very carefully. As you well know, A.M. Best provides some fairly stiff penalties for companies that grow. I think what's important to focus on is that growing into an improving market, particularly as a monoline specialty writer, we think now is the time to be growing. We're encouraged by the results we've seen to date, and we expect things to continue along that line. And so it is our challenge to get A.M. Best comfortable that this is the right kind of growth, and that, in fact, when you see growth attributable to rate, that should be rewarded, not penalized.

Right. But in their defense, you have grown -- I mean your growth has produced underwriting losses because it's being written well north of $100 million combined, which I'm sure is part of their concern. How does that -- what are they saying to you and how is that conversation going? And is important to stabilize your rating in your -- or the outlook in your view?

Yes, I would certainly, over time and over the shortest time possible, like to stabilize the rating. I'll go back to the discussions that were public last November through the press release of A.M. Best and our own press release. A.M. Best was concerned with our growth. Our growth occurred according to plan. A.M. Best was concerned about what they characterized as modest and slight adverse development in recent years. We addressed that, we agree that it was modest and slight, and Rick just indicated it was, again, very modest and slight in the fourth quarter. So those are the principal areas of their concern. Our focus is on continually improving the underwriting result quarter-over-quarter and making certain that we're getting the most rate that the market is willing to give.

Do you expect to have to make another capital contribution from the holding company?

I don't know that I would say I would expect that. As we run our model relative to the amount of rating agency capital that's required, we are prepared to do that if necessary. We've got the capital at the holding company, so we are in a position to do that if it's required. It's just a matter of really now putting in our year-end results, putting in our plan for 2013, and making a decision as to whether or not more is required. We are not reticent to contribute capital to support growth in this market.

I would just remind everyone that while we have put, as Doug mentioned, $70 million down in November, it was just a, well, more than a year prior that we had pulled money up from the operating companies to the holding company because at that time, the underwriting levels didn't require it. So we're really just holding to the capital management that we've always described, and that is we try to maximize the leverage of our capital. And if it's needed in the operations, that's where it is. If it's not, we try to free it up, keep it flexible in the holding company.

[Operator Instructions] That next question is from the line of Mark Hughes.

And just to confirm, on the LPT, the amortization is a function of the payments on the losses, rather than any sort of amortization of the remaining balance. Is that right?

It is a formula that looks at the loss payments that have occurred in the quarter, compared that with total expected payments, and that resulting factor is applied to the deferred gain to arrive at the amortization.

So I'm going to jump in on that. So the effect of the $100 million reserve reduction in the fourth quarter was to reduce the expected losses by $100 million. So now we'll take the actual payments and compare them to a now lower expected loss.

I would now like to turn the call over to Douglas Dirks for closing remarks.

Thank you very much, operator. Thank you for joining us today. I know we'll be out on the road. We'll have an opportunity to meet with many of you in the coming weeks and the next several months. We look forward to that, and thank you for joining us on the call today.

Thank you for joining today's conference. This concludes the presentation. You may now disconnect and have a very good day.