Good afternoon, everyone. And welcome to the TriNet Group’s Second Quarter 2015 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that today’s event is being recorded. At this time, I’d like to turn the conference call over to Mr. Alex Bauer, Investor Relations. Sir, please go ahead.

Thank you, Operator. Good afternoon, everyone. And welcome to TriNet's 2015 second quarter conference call. Joining me today are Burton M. Goldfield, our President and CEO; and Bill Porter, our Chief Financial Officer. Burton will begin with an overview of our second quarter operating and financial performance. Bill will then review our financial results in more detail. Bill, Burton and I will then open-up the call for the Q&A session. Before I hand the call over to Burton, please note that we may make forward-looking statements during today's call that are subject to risks, uncertainties and assumptions. In addition, some of our discussion may include non-GAAP financial measures. For more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, and reconciliations of non-GAAP financial measures, please see the company's public filings, including the most Form 10-Q filed with the SEC and the Form 8-K filed today, all available on our website. With that, I will turn the call over to Burton for his opening remarks.

Thank you, Alex. I'm pleased with the progress we made in a number of important areas during the second quarter. Professional service revenues grew 19% to $98 million. Additionally, professional service fees per WSE grew year-over-year. We surpassed a significant internal milestone with respect to WSE count exceeding 300,000. Total WSE count grew to 302,375, up 16.8% year-over-year, and importantly, up 4.7% from Q1. We finished Q2 with 486 quota-carrying sales representatives, putting us ahead of my commitment of 470 sales representatives as of June 30th. As I have stated in the past that metric and my commitment to 25% year-over-year growth in quota-carrying sales reps is a key indicator of future new sales. Additionally, our workers comp claims experience came in as expected during the quarter, which was a key concern of mine after Q1. I continue to be comfortable with the workers compensation 2015 forecast I gave you at that time. Now while the fundamentals of our business remains strong, I am disappointed that our second quarter financial performance was negatively impacted by higher than usual number of large medical claims. These claims were well in excess of our expected and historical claims volatility. Medical claims volatility was impacted by the frequency of large medical claims and not the severity. Additionally, there does not appear to be adverse selection. These large medical claims do not appear to be associated with new clients, as the large claims have been driven by clients joining prior to 2013. The enhanced large claim medical reporting process we put into place with our medical insurance carriers appears to be working. Unlike Q4, there was no significant impact from old claims in the quarter. As a reminder, our net insurance revenue is comprised of three parts; benefits administrative fees, workers’ compensation revenue and benefits…

Thanks. Burton. Our second quarter net service revenues declined 2% to $122 million year-over-year. Total WSE count was 302,375, up 16.8% year-over-year and up 4.7% since the end of the first quarter. Professional service revenues increased 19% to $97.8 million year-over-year. Net insurance service revenues declined 43% to $24.2 million year-over-year. Net insurance service revenues were affected by a significantly higher number of large medical claims than we had anticipated. Run rate medical claims and pharmacy claims came in as expected with premium being slightly under our forecast. The result in Q2 was an approximate $20 million reduction in our net insurance service revenues compared to our forecast. Our revised 2015 forecast assumes the higher claims level continues and is included in our trend. The result is in addition to the Q2 impact. We are reducing our net insurance service revenues by an additional $10 million for the remainder of the year compared to our prior guidance. Total adjusted EBITDA for the second quarter declined 37% to $24.7 million compared to $39.4 million for the prior year period. Our Q2 adjusted EBITDA margin was 20.3%. Adjusted net income for the second quarter declined 40% to $10.5 million or $0.14 per share, compared to $17.4 million or $0.24 per share in the same quarter last year. Our GAAP effective tax rate was 201% for the second quarter, primarily due to a discreet tax charge of $2 million for the revaluation deferred taxes for New York City. We expect our long-term pro forma effective tax rate to remain at 40.5%. During the second quarter, we generated $25.4 million in free cash flow, which is defined as operating cash flow less CapEx. Historically, we have spent approximately 3% to 4% of our net service revenues on an annual basis on capital expenditures. During…

Thanks Bill. In summary, we are capturing market share with 4.7% sequential growth, the strongest in our industry. Our vertically driven value proposition resonates with prospects and clients. With this continued momentum, my top priority is addressing the issue around the medical claims volatility. So we can return to 15% organic revenue growth with 33% to 34% EBITDA margins. And with that, let me turn the call over to the operator for Q&A session. Operator?

[Operator Instructions] And our first question comes from Smitti Srethapramote from Morgan Stanley. Please go ahead with your question.

Hi. This is Danyal Hussain calling in for Smitti. Burton, you mentioned that you had improved the visibility of the medical claims. But clearly the guidance you gave last quarter didn't contemplate these medical claims coming. So could you just please clarify what aspect of the visibility you've now gotten more comfort with and what’s left to do?

Sure. Thank you so much for the question. The Q4 issue was around claims that had been made earlier in the year and they all came through in Q4. The issue that we had this quarter was a large spike in large claims but they were not from prior periods for the most part. So the increase in medical expenses was largely driven by higher than expected in large claims. So that our system is working, which is getting the reports from the carriers in a reasonable timely fashion. So the other point is the composition of these large claims were largely acute, meaning they're not chronic in conditions that I expect to persist. And the run rate medical claims and pharmacy claims which we consider trend came in as expected. So, my issue was a bunching of large claims in Q2. They were not old claims that were flushed through the system. The reports are working. And ultimately, the final piece I will say is that there does not appear to be adverse selection because the large claims are not from a bunch of new customers joining us with acute medical condition. They were from clients that have been with us for a long time. But the other thing that I would say is that primarily from the passport technology vertical and majority are from California. Our large carrier in California experienced the same spike in claims. So we do not feel we’re either taking on a particularly risky book, where there is adverse selection. The issue is that I haven't seen that type of spikes since I have been with the company over seven years. And we need to find ways to a, get better visibility and b, to dampen the spike because it’s not acceptable, the variability I saw in Q2.

Understood. But at this point, would you consider reevaluating reinsurance options for example, I gave you, maybe where you give up some net revenue but dramatically improved the predictability of the revenue model going forward?

So absolutely any and all things are on the table but addressing the issue around this medical claims volatility and the impact in the P&L is my top priority. So I'm going to strengthen the internal team with our senior insurance executive who is right by my side. I’m going to increase the in-house actuarial and analytical capabilities. And I need to explore ways to dampen that, up till now reducing the pooling did not seem like a viable option from a clock standpoint and frankly our pooling levels vary but they go up to about $1 million for some carriers. Most of these claims were between $200,000 and $500,000 even if I had pooling limits at 500, it wouldn’t have materially changed the outcome of Q2. So anything and everything is on the table but if it was an obvious answer, I would tell you the answer today. And the fact is that just a simple reduction in the pooling limits would not have impacted this quarter materially.

Understood. Maybe just one quick follow for Bill. Just clarifying the change to the guidance, so you mentioned basically you are assuming a higher rate for the rest of the year but clearly $20 million this quarter and then $10 million for the remainder of the year doesn’t seem to assume the same loss rate. So could you maybe just provide a little bit more color there? Thanks.

Sure, Daniel. So where we looked at it internally with our advisors and the best thing we can determine is this higher level of claims will remain. And so we’re trending that forward at the appropriate rate. And that’s why we’ve got the additional $10 million increase. We have also done some sensitivity. And it's very possible that we may not see the same level. But we think at this point, it’s prudent to leave that higher level and increase the trend on it. And we'll just determine over the next couple of quarters, whether this really does go down or whether it's a higher level of claims that we now experienced and have to build into our business.

Great. Thank you.

Our next question comes from Tien-tsin Huang from J.P. Morgan. Please go ahead with your question.

Thank you. Just I guess, Burton, I got the level of confidence that you’ve had in the benefit performance fee line. But you are still thinking about your long-term growth target. Does this make sense to slowdown the sales engine a little bit, just to make sure you can focus on this with the right resources?

So, Tien-tsin, it’s a great question. If you look at the service revenue line, it’s up 19% year-over-year and this was before my new sales reps have kicked in. I think the quality of the reps are great. I believe their productivity will be great and we have an opportunity to capture market. Having said that, we need to resolve the insurance issues and I take full responsibility for that. It is not acceptable. I need to get the predictability in the system. I do think there are somewhat tangential issues. I have a great sales engine. The vertical strategy is resonating. The market conditions are helping, particularly with this new wage and hour law, under $50,000 everybody, once a time and attendance system. There's just a tremendous amount of pressure to get our solution in place for a wide variety of companies and verticals we are in. But I need to address this problem. My focus will be on this problem. Frankly, the training was intensive last week. I can turn my attention opined to this issue. The new reps are in place, the training is essentially done. So look, I will reevaluate it at the end of the year, Tien-tsin. But the reps are in place. I made the 25% growth for this year. I will certainly reevaluate at the end of the year. My hope is we get this under control both from a variability and predictability standpoint and we move forward with the bundled model, which is what the clients are clamoring for.

Got it. Yeah. I get the demand is there, just curios to hear what you were thinking. Just a couple more. Just the large medical claim issue, can you just go over it again, how is this one different from what you saw in the fourth quarter? Are you changing the way you are rolling that through and the way you guide philosophically?

So it is very different in my mind in Q4, Tien-tsin. A, the magnitude is a lot greater. It was about a 5% spike in Q4, which included a significant amount of older claims that were up to six months all being washed through the system. We worked with our carriers directly with the Senior Executives and said that was unacceptable. They need to give us a visibility. This quarter, the spike between May and June was closer to 15%. So it was the biggest I had ever seen. They were not predominantly old claims. There were some from March but that's acceptable in my mind because it take 60 data to process, not six months. So, these were claims that were incurred in Q2 and at the very tail end of Q1. We got visibility to them in a reasonably timely manner. As I said, they were mostly from Passport, many from California, lot of people on high-end medical plans. They were acute things like fractured skulls and things like that. So this was not chronic where we think it will continue. And I'm still digging claim by claim to understand. There was a statistic bill on a number of large claims today. Can you point that out to Tien-tsin? Which will give you some idea of the frequency being up so much? And it was not the severity. So it's not that we had a lot of big claims or a small number of big claims. It was a lot of medium-size claims.

Got you. Okay.

Yeah, Tien-tsin, this is Bill. So when we look at just the number of claims greater than 50,000, it really did, it go up significantly in the second quarter but plan year-to-date. So for last year, plan year, we had somewhere in the neighborhood of 500 claims that were greater than 50,000 and through May, which is when we get good pay claim data. We have around 400. So, we did see a pretty good increase and a lot of that happens in Q2. So it was tracking with our forecast in April, May. And as Burton mentioned, there was a sequentially large increase from May to June, which was a big surprise. And you also indicated the sequential increase from November to December was about 5. So this was 3x sequential increase, so we are really just trying to understand it. We took time to go to our carriers, to make sure that there wasn’t something that changed with their business or their processing of significance or are we seeing something completely different. And the majority of this occurred as Burton mentioned in California. Our carrier there did see an increase in claims in the 100,000 to 700,000 range in the April, May and June timeframe. So it seems to be similar. They did not have a good understanding yet of how it's affecting their book and we are still going through it as Burton mentioned, we do enough, know enough to know the cohort is below -- before 2013. They are primarily acute and they are in Passport.

That’s helpful to get that. Just one last quick one, just on the guidance change, which I think it is $25 million, $28 million difference in revenue and EBITDA. Anything changed on the professional services fee line that we need to be aware of?

No, I think you are going continue to see the progress that Burton mentioned throughout the year. So, you will see a slight continued increase there along the trend that we've been going. And the negative is just recognizing what happened with the medical claims and building those and that $30 million increase, $20 million that hit us in Q2 and $10 million for the rest of year to make sure that we think we've got a forecast now that builds in all the information that we know about.

Got it. Thanks for taking my questions.

Thank you so much, Tien-tsin.

Our next question comes from Timothy McHugh from William Blair. Please go ahead with your question.

Hi. I just want to circle back to dissect this a little bit more. I guess, if it was a $20 million impact in Q2 and you're assuming a similar frequency, why isn’t that $20 million impact or $40 million, I guess for the second half of the year?

Tim, I don't think we know enough to say that this frequency is going to continue to go up. I think we’ve been talking to our advisors and really understanding from our internal team. We don't expect that it would necessarily go down to the previous level. So, we're assuming that increases their and we take that higher level and now we are trending it forward, which is normally what we would do with our additional claims levels. We trend it forward at a slightly higher rate for those larger claims, which is what we've done.

Okay. So, I guess -- all right. I can circle back, I guess. I’m not fully clear why that doesn’t result in bigger, more of an increasing expense or similar to increasing expense to and similar impact to Q2 as you go forward?

We are not expecting, Tim. We are not expecting another significant step up like we saw in Q2. But we think that level of claims doesn't necessarily drop down to the previous level. It stays and gets trended forward at approximately 10%. So, we can talk more.

Okay. And I guess, as we I guess, the part of -- I guess, there was a part there that you said the premium growth was a little less than you expected. I guess can you, of the $20 million how much was premium growth versus just the claims piece?

The premium -- we saw about $3 million of premium slightly lower than our estimate and that’s for the most part is we saw some of our clients making employee-only versus employee family, so slightly lower premium in terms of what they were selecting. And so that's something we're just going to have to look at it. I think part of that is just our ability to monitor that more closely, that did not come in June. We did see that developed over the three months. It was within our normal forecast of variance level. So, we were able to absorb that. It’s the claims piece that we weren’t able to cover.

Okay. And then, Burton, you talked a little bit about, I guess, SOI, the sales trending in the right direction. But I guess, did you talked about productivity in the quarter, I guess, of the sales force and was it fairly universal across the three platforms, was there a lot of variance and how it played out? Any color there would be helpful?

Yeah. Great, Tim. So, Q1 was somewhat disappointing in SOI and I see it trending up which is great. I talked about the verticalization of the SOI sales force further and a bunch of new people coming on board. So, I was happy with the overall productivity of the sales force. So, I was not particularly thrilled with SOI in Q1. Q2 was trending in the right direction frankly. Ambrose had a great quarter in Q2 and Passport did a good job as well. So, if I had to rank them, that's where I'd rank them. You can see by the PEPM service fees, that it was up considerably year-over-yea. So that gives you some indication of what clients are electing and what’s happening from a service fees standpoint. We are not getting a lot of pricing pressure. And as I say, a lot of these deals are -- essentially there isn’t a competitor in there. So I didn’t talk a lot about particular customers, but there were some really wonderful wins, a professional services company in Huntsville, Alabama with 193 WSEs that came on board. And they are doing a bunch of government contracts. And they are growing like crazy. And they absolutely love passport. There were phenomenal examples of different hedge funds that came on board on the Ambrose platform. So I just see a really opportunity frankly for TriNet and others to address the complexity in the small, medium businesses and it goes back a little bit to Tien-tsin’s questions. I need to focus on the variability of the insurance and the team needs to execute on the channel. But I am very comfortable with the direction that channel is going, the sales meeting, 700 people in Phoenix, Arizona in a 112 degree weather going to these training classes, it’s the largest sales kickoff obviously in TriNet’s history and it was executed flawlessly. So that ended on Friday, people came back, and now they are in their seats and they are executing. And to have almost 500 quota carrying frontline non-duplicative sales reps in the field today, I believe it’s the largest sales force on the planet in this arena.

Okay. Thank you.

Our next question comes from Ato Garrett from Deutsche Bank. Please go ahead with your question.

Just wanted to look a little bit at your expectation from being your sales force growth target. But I guess looking at the WSE growth year-over-year kind of decelerated a bit in the quarter. How much was like -- should we expect this to recover in the back half of the year, just given how much the sales force has grown?

Yes. Ato, this is Bill. I just think to think about is that the total WSE growth does take some time for the sales force to season as we talked. So the new reps, we are not going to really expect them to productive for six months. And I think having 90% year-over-year growth and continuing to increase our sales force is not a bad start for that sales force. So we are happy with that. We would always like to see that productivity, be it completely inline with the growth, but I don’t know that we will quite get there. I think there will always be somewhat of a lag.

Great. And then also looking at the sales force initiative you have with SOI, do you have really timeline of just an update as far as how much is completed and when it might be fully done?

So that’s great question. The answer is we’ll always be splitting out new verticals, but the fundamental construct and the changeover what it was in the past is done. The fundamental construct one having dedicated territories with verticals, with management that is focused on those verticals and having referral channels including brokers, trusted advisors, and third parties, it is pretty much already there. So we have formed some third party relationships. Apparently they haven’t been fully announced yet. But we are looking to trusted advisors to accelerate that growth further. And I am pretty optimistic about those, the ecosystem around each of the verticals we serve, as well as the SOI sales force and go to market. It was more turn than I would have liked from a sales reps standpoint. I see that slowing down. I see the new folks coming in. They are coming into the verticalized model. Every new rep that came in came in to a verticalized territory. And ultimately, I believe we will be able to feed them a lot of high quality leads through our referral partners, through our brokers and through relationships like we have with we work today.

Great. Thanks. And just couple last quick ones. Do you have a new target for your sales force where you want to be in the full year? And then lastly, it seems like you said CapEx was a little bit higher than the 3%, 4% that you target, this quarter is around 5% if I recall correctly. Can you talk about where that and additional investment looks, like what areas are you making additional investments in the quarter?

Great. So from a sales rep count, I want to exit on New Year's Eve with the 470 that would be a 25% year-over-year growth. So right now, I need to get the folks out selling and I need to hold onto those reps, so I will be north of the committed number of 470. And then assuming no changes as we move into '16, I will commit to use it by June 30, we will have the 25% increase over the 470. Why June 30 because it takes six months for those reps to become productive. They don’t have a quota. When they come in the door, they go into training, they generate the leads, and they learn the business because they are coming out of the verticals. So until I come up with a different model that would be my commitment, the 470 we met. So I need to hold onto 470 for New Year’s Eve and then 25% by June 30 again. On the CapEx, I will turn it over to Bill. But suffice to say that the client experience as it relates to the platform and services is being enhanced each and every day. We have releases now monthly. And Bill can talk little more about the CapEx.

Yes. It’s really something pretty simple and that we’re spending at the target level of 3% to 4%, given we have the variability in the medical line. It just took that percentage up to 5%, but it’s on the targets in terms of getting our IT and products in place for our clients. So that’s where we’re spending at, but it is at our target level. We just had little revenue than we had anticipated, which is why it tipped up just a percent.

Got it. Great. Thank you.

Our next question comes from George Tong from Piper Jaffray. Please go ahead with your question.

Hi. Good afternoon.

Hi. George.

Hi. Burton, can you discuss what might have caused the higher than expected frequency of large medical claims this quarter, particularly given the grouping of claims on the passport side? And secondly, can you describe maybe in a manner understandable to investors, how you model and forecast large medical claims frequency and what analytical actions you might be undertaking to manage volatility and improve visibility of these claims?

Sure, George. And welcome to the call. So the increased medical claims were largely driven by these higher than expected large medical claims, that’s sort of number one. Number two, it’s important to understand that my characterization is these large claims were acute, meaning they are not chronic, so they don’t visit into leukemia. As it goes on for years and years, it was more acute condition. The other point I want to make as you delve into this medical claims issue is the run rate. Medical claims and pharmacy claims came in as expected. I consider that trend. So if you see a big jump in average medical claims, if you see a big jump in pharmacy claims, that would be an ongoing increase in the baseline. And as Bill said, our premium was a little under forecast. We need to get that forecasting little better. Additional characterization would be that people are opting in, obviously if there is a large quarter for new clients coming in and they may opt in at a higher deductible plan or they may opt in without the family or something else. So there was a slight under forecast from what we get in premiums, because in the end the performance fee is the premiums last claims. That’s the number we are talking about. The other point to make is, it wasn’t a bunch of old claims being flushed through the system. We do have visibility to the claims for the quarter. The point I would make is you want to make sure that you don’t have adverse selection, meaning I am bringing on a bunch of sickly clients. The clients that drove these large claims in Q2 were here prior to 2013. And again, they were out of the passport book of…

Yes. That’s very helpful. Thank you. And Bill or Burton, your new guidance assumes large medical claims treatment fees base elevated at current levels. This would suggest something structural has changed as opposed to merely the timing of claims. Can you discuss why or why not something may have changed structurally on the medical side?

Sure. And George, I think, the -- as Burt mentioned, we look at run rate, which should be pretty predictable and we also look at pharmacy, which has also been predictable. The nature of large claims is that they are somewhat unpredictable and that’s the difficulty that we have in trying to really understand what’s happening. I don’t know that it’s structural. It’s possible that there will be a higher level or it’s also possible as we talked into carries and we’ve talked to others in the field who have seen large groups with this type of claims level. Sometimes these things go back to the previous levels and other times they stay at a new plateau. We don’t have enough information now to really understand that yet. So that’s the piece that we’re going to be continuing to look at. But irrespective of that level, I think, Burton is also saying, we do need to figure out when we do have these unexpected increases? We have to figure out a way to dampen the volatility, which is as separate, but equally important, not more important aspect that we’re having to look at.

Great. Thank you.

Our next question comes from Jason Kupferberg from Jefferies. Please go ahead with your question.

Hi, guys. This is Amit Singh for Jason. Coming out of IPO, the way we thought about the business was and the way you had spoken about is long-term, it’s a 15% year-over-year organic growth type of and net revenues and adjusted EBITDA margins in 33%, 34% range? But in these large claims, I mean, you’re expecting them to continue on the level to continue on for the rest of the year and if that continues on, assuming it stays at this level going forward, so the way to think about the business in the near mid-term is, the adjusted margin closer to the 30% range and the topline organic growth closer to 12%, 13% range, am I thinking about it right?

Yeah. So, good question. Our long-term financial model remains intact. And as you point out in the short term, we need to understand the impact of any potential changes as we consider these options. So as we talked about the service revenue growth was 19% year-over-year, I expect the strong second half. Obviously, if the performance fees do not come back in line, it’s a drag on the growth rate. And I think you're absolutely right, if the 29% or 30%. So the long-term capability to get back to North of 15% topline revenue growth is very much there from my standpoint. But we need to look at how this predictability of our medical revenue and its contribution to net insurance revenues comes out over the next two quarters or so.

All right. Great. And you talking about strengthening your internal capabilities to get a better handle on these plans and also hire some outside consulting firm. Should we see any sort of spike in your G&A or any sort of expenses over the next couple of quarters or is that not material now?

Amit, I think we’ve got enough capacity. I don't think we’re going to see a dramatic increase. I think we should be able to ignore and the work that Burt is referring to in the normal course.

All right. Thank you so much.

Thank you, Amit.

Our next question comes from David Grossman from Stifel Financial. Please go ahead with your question.

Thank you. Most of my questions have been answered. I just have two very quick follow-ups. First is Bill, can you repeat the statistic that you provided about the claims over 50,000, I didn’t quite catch that?

Sure, David. So for our prior plan year for claims over 50,000, we were seeing a number of approximately 500. And for plan year to date, so for the eight months that we are in our plan year, it starts October to May in terms of where we have good statistics, we’re seeing approximately 400. So the level is elevated and a lot of that has come through in terms of what we just experienced. So, we’re trying to just understand that. Our estimate at the end of last year as you recall, we thought that that was an increase. And we built that level into our 2015 planning and now we’ve seen it in least in Q2 go up higher than that, so we’re trying to really understand what that means.

Right. So just so I got the numbers correct, is there a comparison year-over-year for the quarter, or are we comparing the eight months that ended May with a certain number and you’re saying the run rate just for June is substantially above that range?

Yeah. Well, the run rate that we’re experiencing in the second quarter has taken us up significantly. We don't have completely accurate statistics when you get on month-to-month basis in the current quarter. So, I’m giving you the best relative data on pay claims, which is a full year versus plan to date. So, just indicating, the run rate is up. And we know a little bit of the nature as Burton described but that’s the best I think I can give you at this stage.

I see. And then the other question I guess gets back to a question that’s been asked I guess, in a couple different ways. And it gets really to the fundamental business model around offering insurance. And as you know, two of your largest competitors pretty much pass through the healthcare side of their business. And I'm just curious why -- first, why you choose this particular model that you have? And then secondly, why there is still some reluctance given the volatility in these claims to migrate towards that model given that much bigger companies who have much more room if you will for area just given their scale, or the other businesses that have chosen that route, why you think you can stick with this particular model and make it work?

It’s a very valid question, David. The reason why we have chosen to do a portion of our business this way is because the deductible program does give us flexibility to formulate our plan structures and our pricing with the carriers. I think it aligns us and that is something that we have found prior to this really large amount of volatility to be pretty useful in how we run the business. Now that being said, if we have this level of volatility that’s on an unacceptable risk that we have to try to figure out as Burton mentioned, to look at various ways that we could try to mitigate that. It may be taking on different insurance constructs, either around the current structure or in addition to it to limit the volatility. So, we’re going to keep looking at all of those. I think there are some benefits to it, but we’re going to have to manage it against but obviously, the risk of volatility.

Great. If I can just ask one follow-up to that, is there a particular segment that that flexibility becomes particularly important, or is it important in all three segments in terms of your ability to use that to your advantage and garner share?

Yes. So David, it’s primarily in Passport, which is where we have had the structure. As we talked in the past, the blue and grey business SOI doesn't have that many of its worksite employees, on medicals only about 25%, given that they -- many cases don't take it if it’s offered. And it's also not a structure that we have seen historically at Ambrose. So it's really been the passport structure that if we've historically used it and we will need to refine.

Got it. Okay, guys. Thank you.

Hey. Thanks, David. Appreciate it.