American Coastal Insurance Corp (ACIC) 2014 Q4 法說會逐字稿

Greetings and welcome to the UPC Insurance fourth-quarter financial results call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Adam Prior, of The Equity Group. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us. You can find copies of UPC's earnings release today at www.upcinsurance.com in the investor relations section. You are also welcome to contact our office at 212-836-9606 and we would be happy to send you a copy. In addition, UPC Insurance has made this broadcast available on its website.

Before we get started, I would like to read the following statement on behalf of the Company. Except with respect to historical information, statements made in this conference call constitute forward-looking statements within the meaning of the federal securities laws, including statements related to trends in the Company's operations and financial results in the business and the products of the Company and subsidiaries.

UPC's actual results may differ materially from the results anticipated in those forward-looking statements as a result of risks and uncertainties, including those described from time to time in UPC's filings with the US Securities and Exchange Commission. UPC specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise.

With that, I'd now like to turn the call over to Mr. John Forney, UPC's Chief Executive Officer. Please go ahead, John.

Thank you, Adam, and good morning to everyone participating in the call. This is John Forney, President and CEO of UPC Insurance. And with me today is Brad Martz, Chief Financial Officer.

On behalf of everyone at UPC Insurance, I want to thank you all for your interest in our Company. Brad and I look forward to answering any questions you may have at the completion of our remarks.

Yesterday, we reported the results of an excellent quarter and an even better year. We are humbled by the financial success we have achieved and I am grateful to the associates of UPC Insurance and to all of our external partners, independent agents, investors, regulators, and reinsurers who have contributed to that success.

The numbers are impressive from top to bottom and Brad will cover them in more detail. But they are not the true measure of the success we had in 2014 or of the opportunity we have in the future.

As I have stated repeatedly on these calls and in other forms, our goal is to create a geographically diversified insurance franchise that can endure for generations. We want to have a company that cannot only survive, but thrive when the wind blows and when it doesn't. When markets are soft and when markets are hard. When reinsurance capital is scarce and when it is plentiful.

In 2014, we took meaningful steps towards building that franchise. Here are just a few highlights.

We gained licenses in seven additional states and two more subsequent to the end of the year, bringing the total number of states in which we are licensed to 18. We launched UPC 1.0, our proprietary product based on core non-cat underwriting principles (technical difficulty) sophisticated cat-pricing algorithms. We will roll this product out in all our states in the coming months and are confident that it will not only further our distinct brand identity, but provide us a competitive advantage in many territories.

We began the process to bring in-house certain underwriting, customer service, and administrative functions that have historically been outsourced. In conjunction with the coming launch of a new and dramatically improved front-end system for agents, these steps will further our ability to positively influence the agent and policyholder experience and therefore build our brand.

We hired key new members of our executive team, including Chief Underwriting Officer Judy Copechal and General Counsel Kim Salmon, thereby completing the assembly of an eight-member executive team that I believe is the most comprehensive and best by far amongst our peer group.

We launched our commercial residential product, which is off to a great start in Florida and which we plan to rollout to other states in 2015. We initiated and subsequently completed the purchase of Family Security Holdings and its subsidiary, bringing us a new group of talented associates, an excellent book of business in Louisiana, and a Hawaii-domiciled insurance company that provides us additional market access and strategic value in the future.

We completed a follow-on equity offering and later filed a shelf registration statement that will help ensure we can access capital markets prudently and efficiently to support our growth.

We purchased an innovative reinsurance program, providing over $1 billion in coverage that protects us against a repeat of any historical storm that has hit the United States since 1900 and more. And we filed and received approval for a strategic repositioning of our rates and product features in Florida, designed to promote continued and diversified growth in our home state.

All of these steps are meant to ensure the fulfillment of our value proposition to our customers: financial stability, products that work, superior claims service, ease of doing business, and fair pricing. We have invested a lot to make all this happen and that is perhaps the best news of all.

We have achieved great financial results, while investing heavily for a diversified future with a long growth trajectory. That's why I'm confident that our best days are ahead of us and why we look forward to the journey.

At this point, I'd like to turn the call over to Brad Martz for a more detailed discussion of our financial results. Brad?

Thank you, John, and good morning. This is Brad Martz, CFO of UPC Insurance. Before we get to the financial highlights, I would also like to encourage everyone to review our press release and Form 10-K that we plan to file on Tuesday, February 24.

The highlights of UPC's fourth quarter include net income of $11.4 million, a 55% increase from the fourth quarter of 2013; a terrific combined ratio of 81.6%, comparing favorably to 82.7% last year; book value per share increasing to $9.75 per share, up 47% from prior-year end; return on average equity of 27.2%, a-6 plus point improvement year over year; continued favorable reserve development; and solid organic growth in direct written premiums.

Drilling down on UPC's revenue production, you will find total revenues grew 20% from $63.4 million last year to $76.2 million this quarter. Gross written premiums were approximately $114 million, split between about $92.1 million of direct written and $21.6 million of assumed written for Citizens Property Insurance Corporation in Florida.

Of the $92.1 million in direct written premiums, they increased 17.2% from the same quarter a year ago. Florida was 65% of the total and all other states grew to 35% of our business mix.

For the quarter, all of our direct written premium growth was outside of Florida, but for the year, Florida accounted for approximately 27% of our year-over-year growth and the 7 states outside of Florida were an impressive 73% of the $78 million year-over-year increase.

Our team has worked extremely hard to build out our platform for growth and we are thrilled that UPC is now approved to write in 18 states. While the 10 new states in which we have not yet begun writing represent tremendous opportunity, we will not lose sight of fully exploiting all growth opportunities in each and every state.

Switching gears to UPC's loss results, our loss trends remained mostly favorable, with both frequency and severity improving slightly during the fourth quarter this year compared to prior year and the prior quarter.

For the current quarter, our gross loss and LAE ratio improved to 29.2% versus 32.4%, a 3 point decline. Our underlying gross in loss and LAE ratio also improved slightly to 30.6%. Development on prior-year loss reserves was favorable for the quarter and management remains comfortable with all of its carried liabilities in all accident years.

UPC's loss experience outside of Florida continues to meet or exceed our expectations and all states are currently performing within our [reliable] pricing targets. This is good evidence that we are growing responsibly in every market and mostly avoiding the plague of any adverse selection. Net of reinsurance, our loss and underlying loss ratios all showed improvement for the quarter and the year.

On the expense side, our Company saw its non-loss operating expense increase approximately $6.7 million or 33% year over year. The gross expense ratio increase of 3 points for the quarter to 25% was driven by higher acquisition costs outside of Florida and continued investments in people and infrastructure required to insource significant systems and service capabilities.

Also worth mentioning is that for the year, our net expense ratio actually declined one point due to lower insurance costs. So we are carefully managing the buildout of our future operating model within targeted parameters.

Our balance sheet remains solid, as UPC ended the quarter with just under $204 million of shareholders' equity, lower financial leverage, and a net unrealized gain in the investment portfolio. Our liquidity remains strong, with cash and investment holdings increasing by $116 million or 36% over the prior-year end to roughly $443 million.

Statutory surplus of UPC was approximately $126.2 million.

With that, I'd now like to reintroduce John Forney for some closing remarks.

Thanks, Brad. Once again, I'd like to thank everybody for your participation and your time today. At this point, we would like to open the call up for any questions that you may have.

(Operator Instructions) Arash Soleimani, KBW.

Just had a couple questions here. Can you talk about what you're seeing in Massachusetts and Rhode Island in terms of weather losses so far this year?

Sure. This year, the Northeast is experiencing another heavy winter. Not unlike 2014 and 2013, where we had the Company experienced similar catastrophic [long] experience. I don't think the activity in 2015 is unusual. Given the prior two years, it's expected, it's priced for.

And to further bolster our defense against winter storm losses, on January 1, we incepted a new underlying catastrophe reinsurance tree that provides us $22 million of coverage in excess of $3 million. So for large cat losses that are underneath our $25 million catastrophe programs retention, we now transfer any excess risk above $3 million.

Okay, great. And in terms of severity, would you say the -- I guess the weather events in the Northeast are -- did you say they are pretty similar in severity to last year in 2013, when you had storms such as Nemo?

Absolutely.

Okay. And would you say those are sort of contemplated within the current pricing you have in place? Do you think the pricing you have in those states, you know, you feel comfortable that that takes these types of events into account?

Yes, it does. It's all part of our expected loss and allowable pricing.

Okay. And also, can you talk about where the favorable development came from this quarter?

Mainly on accident years 2012 and 2013. The majority of it was 2013. Those are the two accident years where our conservatism may have been a little heavy-handed as we sought to implement a different reserving philosophy. We've talked about that at length in prior calls.

But the claims department has done a terrific job managing our claims and we feel very good about the reserve practices. We haven't made any significant changes. We're not overreacting to the favorable reserve development. We saw this in the 2014 calendar year. One year doesn't make a trend, but we feel good about our practices.

All right, great. And the other question I had -- and I know part of the year-over-year difference on gross written premiums in Florida is impacted by assumed premiums -- but I guess my question there it looks like if you are take assumed premiums into account, Florida gross premiums declined by about 9%.

And I guess my question is, is that part of like a strategic initiative to sort of get rid of underperforming policies or is that sort of just lumpiness in terms of written premiums? Just trying to better understand that. With a lot of (multiple speakers)

Sure. This is John Forney. I'll take that question. If you look at the quarter and take out the assumed premium, that explains 80% of the decline in the Florida premium. We just did a smaller takeout in the fourth quarter than we did a year ago.

As you know, takeouts are not a core part of our growth strategy. We do them opportunistically and very selectively. And we found the selections not to be as attractive this time as they had been previously. So we did a smaller takeout and that's 80% of the difference.

The other small percentage decline is due to two factors. One, increased competition in the Florida market, with a lot of folks competing for business and pricing stuff very aggressively. And our desire to reposition our book in Florida to diversify to parts of the state where we had not had historically a big presence.

I think if you take the lens back and look at the bigger picture, we grew in Florida on a direct basis. Even not taking into account assumed premium, we grew by about 7.5% in 2014 on a base of almost $300 million.

So that's good steady growth. It's at the low end of the guidance we had given of somewhere between 5% and 15% organic growth in Florida. But again, that we are happy with that, given the very competitive nature of the Florida market and given our desire to reposition our book, which required us to file new rates and product features to enable us to grow in parts of the state where we hadn't before. Those went into effect January 1. We expect to see the fruits of that this year.

And again, which parts of the state are you trying or you want to increase your exposure to?

Broadly speaking, if you look at the state, it's bisected more or less by Interstate 4 and disproportionate portion of our book has been south of Interstate 4. And we're looking to diversify that north of Interstate 4.

Now, most of the people in Florida live south of I-4. So if you're following the population, you are going to have most of your business south of I-4, but nonetheless, we needed to get some additional exposure in the northern half of the state, broadly defined, and that's what we're trying to do.

Thanks. And just to touch on your comment on increased competition in Florida, what is your expectation for overall pricing in the state? Is it kind of mid-single digits down or you think it could even hit more of like a 10% down type of scenario in the quarter? What are your sort of thoughts on the market?

I'm not big on prognostication. I can just tell you what we've seen in filings and that mid single-digit down is -- has been fairly standard across the board for firms that have been filing for new rates, including ourselves. Overall, single-digit declines has been representative with the kinds of filings that we've seen.

Okay, great. Thanks for the answers and congrats on the quarter.

(Operator Instructions) Samir Khare, Capital Returns Management.

I think you guys had three takeouts in the fourth quarter. I was wondering how many policies actually stuck with you from each of the takeouts and the average premium from each. I think two of them were commercial residential.

The earned portion of the impact of the three takeouts in the fourth quarter was just under $4 million. And obviously, there are losses associated with that, including IBNR reserves that we would carry. So it's not wholly accretive just based on the earned premium.

(multiple speakers) Sorry, go on.

Okay, so we took out 25,000 policies on November 18 on the personalized takeout. December 31, there were 18,797 of those policies left.

Okay. How about for the commercial residential takeouts?

Let's see if I can find that real quick.

I can move on to another question while you guys look that up if you want. Yes?

I've got it. Okay, so in the November commercial lines takeout, we won 86 policies, but only 51 of those were in force at year end. December, we had 52 policies. Talking the -- November commercial lines was a little over $2 million in premium and December commercial lines was about $1.4 million in premium.

Okay. And the 18,000 policies that stuck with you from the homeowners takeout, out of the 25,000 policies, does that match your expectation of what would ultimately stick?

It did. Yes, it's actually closer to 19,000. About 18,797, to be exact, were still in force at year end. About $34.2 million in premium.

And I think it does meet expectations. We know market is suffering from a little bit of takeout fatigue. Agents are being bombarded by multiple companies for assumption opportunities. And I think it's consistent with prior years, maybe slightly worse on the opt-out ratio, but consistent with expectations.

Okay. And the opt-in, I guess, or the opt-out rate that you guys experienced in Q4, is that -- I think you guys have a Q1 or a January takeout. Is that what you are expect -- what you are seeing so far as well?

Correct. It will be about the same size as the December takeout. About -- roughly 50 policies. About $1.3 million in premium. Building that book slowly. And remember, you know, takeouts are nonrecurring transactions. It's the way we took to augment our growth strategy. It's not the foundation of what we are given.

Okay. And did you guys -- I'm sorry, I may have missed this. Did you guys say how much cash you guys have in the Holdco at this point?

I mentioned we had cash -- the cash on the balance sheet and the holding company, right around $55 million, if I remember correctly.

Okay. $55 million. And is there a max net premium to surplus we should be thinking about that you guys want to stay under before you book more cash in from the Holdco?

I'm sorry, could you repeat that?

Is there a maximum net premium to surplus that you guys kind of want to stay under before you put more money into the insurance subsidiary from the holding company?

No, we don't have an automatic metric that we are looking at. There's a whole bunch of factors that go into our decision of how much cash to hold with the holding company versus the insurance company.

Okay. And the company that you guys said you have for the Northeast because you bought it [1-1] -- I think it was in excess of $3 million. What did you guys pay for that?

It's premium-rated. So the final cost will be determining how much premium is written in 2015 during the treaty year.

Okay. And is that a per event or is that an aggregate cover?

It's in aggregate. It's got one free reinstatement, so it's $22 million of limit with a contract limit of $44 million.

Got it. All right. I'll requeue. Thank you.

(Operator Instructions) Dan Farrell, Sterne, Agee.

A question on your expansion in other states. I'm curious what your current view is on the potential and ability to do acquisitions or smaller book roles. Do you see companies trying to keep more business or do you still see ability to take up out blocks of policies or deals and things of that nature.

Again, this is John Forney. Thank you for your question. We have over the last couple years looked at lots of different possibilities for acquisition and companies or books. As you know, we just completed the first one, an acquisition of Family Surety Holdings, that brought us a good-size book of business in Louisiana, as well our second insurance company domiciled in Hawaii that gives us great strategic opportunities going forward.

We see other opportunities out there. We've been exploring them. But we want to be disciplined in what we're doing. But certainly, there are opportunities in that regard going forward.

Okay, thanks. And then just as you continue to expand your state footprint, I was wondering if you could talk about how you approach managing sort of the risks in different states and maybe less so on cat, because you can use a lot of reinsurance to manage that.

But how do you sort of assess attritional loss in other investments, in people, technology, things like that that you do to sort of understand those risks? And then should we also think about the G&A ratio potentially trending sort of at this level or maybe having some continued investment as you try and put in things like that to plan for further buildout? Thank you.

We take a very methodical approach when we are entering these states. We research the markets thoroughly. Our product management department produces the results of that research.

We hire people on the ground, usually before we are even licensed, certainly before we are writing any business. Those people that we've been fortunate to hire in all of our states have spent their entire career in those states, in either a marketing or underwriting or both. And so they have great experience in loss factors and with agent relationships and can help ensure that we are not going to be adversely selected against.

We have customized underwriting standards for each state on age of home and type of construction. And various exclusions or inclusions, depending upon the loss characteristics that are unique to each state. And we try to be very careful about what we're doing.

And so far, that has worked out very well. As Brad noted, our loss experience in all of the states that we've gone into has been at or below our expectations. And that's attributable, I think, to the careful preparation that we've done as we've entered these states.

With regard to your question about G&A, there certainly will -- over time, we will have the benefits of scale and then our G&A costs will be able to decrease as a percentage of premium. That probably won't be this year.

As I noted in my remarks, we are investing heavily in technology and we are transitioning from a model which outsourced certain functions to one that is going to insource virtually all functions. There will be some redundancy while we make that transition, because we want to do it very carefully so there is no disruption to our agents and to our policyholders.

This year, you'll see some of that redundancy show up in our G&A costs. But over time, we expect to realize significant benefits of scale.

And Dan, this is Brad. If I could expand on that one one moment. The recurring costs related to policy acquisition that our system related today are captured in policy acquisition costs and they are variable related to our policy count.

Those are the cost that we seek to eliminate by increasing some of these G&A expenses, moving from a variable cost model to a fixed-cost model. You'll start to see the policy acquisition costs come down, not necessarily the other operating.

That's very helpful detail. Thank you very much, guys.

Casey Alexander, Gilford Securities.

A couple of questions. The -- a slight decline year over year in reinsurance costs. And I know it's early, but everybody is in discussions with the reinsurers. And there were no major storms last year. How do you see the reinsurance cost trend developing, going past the June date into late 2015, 2016.

We are in discussions with reinsurers and I don't know that we have a prediction about how the market will go. Those are very favorable discussions. There's obviously there's lots of capital available.

As you know, the major reinsurance brokers, Aons and Willis and others of the world, have been predicting anywhere from 5% to 15% declines per unit of risk in reinsurance for the coming treaty year. We don't have any reason to question those predictions. I don't know if they'll come true or not, we're just trying to make sure we put in place a reinsurance program that provides us ample protection.

But there are clearly is a lot of capital still available for reinsurance and we expect to put in place a cost effective and comprehensive program this year.

All right, great. That's very helpful. Secondly, on the Family Security deal in Louisiana. Was that competitive? Were there other buyers competing for that or was that more of just a direct negotiation?

Family Security had a very valuable franchise in Louisiana and they certainly had other companies that had expressed an interest in purchasing them. The owners of Family Security for various reasons thought that we were their best strategic partner going forward and so decided to enter into negotiations with us and conclude the deal.

Okay, great. John, thank you for taking my questions. I appreciate it.

Dan Harvey, The Southeast Companies.

Good morning. I got a series of questions. And with the G&A costs, I was curious when do you guys plan on moving into your new office? And what is the status of the parking lot that's contiguous with that piece of property?

Thank you, Dan. For those of you not from St. Pete, that's a pretty St. Pete-specific question. We are moving into a new headquarters here in downtown St. Petersburg that we purchased from AAA. It used to be called the AAA Plaza. Now it will be known as the UPC Plaza.

And we are -- we are just selecting construction management firms. We'll begin permitting and construction process to remodel the inside to suit our Company and we expect to move in in the fourth quarter of this year.

There is surface parking that we own at the building. There is also a surface parking lot that we lease from the city of St. Petersburg that has 87 years remaining on the lease. And we have ample parking between the owned and that lot that we will lease from the city on the long-term lease and that's the status as of now.

All right. Thanks. Switching up to the Northeast and you know, the property and casualty business were right. And then we are tying in with some car insurance up there. How is that working and do you see United getting into the car insurance business?

Thank you, Dan. What Dan is referring to is the strategic partnership we have with Arbella, which is a large, mostly autowriter in New England, very well respected, third-largest autowriter in the state of Massachusetts, where we give mutual discounts to each other's customers. And that's been a very successful partnership for us and for them and enabled us to access a whole new agent community and to grow our book up there.

So we've been very happy with the way that's gone. We have zero plans to enter the car insurance business directly -- period.

Thank you. The political climate in Florida, with our new mayor and McCarty up there, the insurance commissioner, how is that looking these days? Specifically, I was really worried about Charlie Crist getting elected and doing some cram down on us again.

We certainly think that the regulatory environment in Florida is fair and evenhanded, as it has been out for some time. I think that Commissioner McCarty has done a terrific job, both in Florida and his work at the NAIC. And we enjoy a very positive relationship with the OIR in Florida.

All right. Then my last question will be you know, with our stock, do you see any -- I appreciate the increase in dividends. Do you see anything else coming up that way with a bigger increase or do you see us going in there supporting our stock price with any buybacks?

We have said consistently that we want to have a company that has a consistent dividend that grows as the scale and earnings of the Company grow. And that's why we increase the dividend by a penny a share per quarter. It's commensurate with the growth of the Company. We hope and expect to be able to continue that as our Company continues to grow and the earnings of the Company grow.

We have no current plans to do share buybacks and we will evaluate the need or the advisability of anything like that in the future, if it becomes advisable. Right now, we have plenty of opportunities to invest our money in growing our business rather than reducing the capital that we have invested in the business.

And then the follow-up -- and my last question is, is there any chance that you're going to go out and tap the equity market that -- to bring -- to dilute the shares outstanding and bring in more capital?

Well, if we did tap the equity market, it wouldn't be to dilute the shares outstanding. It would be because we have possible growth opportunities that would increase returns to investors over time.

We are very conscious of making sure we maintain good returns on equity. And hopefully, you see that in the results that we've achieved in the last three years, going from 16% to 20% to 27% return on equity. Those are pretty eye-popping numbers. I saw a Swiss Re report that came out yesterday on the P&C industry in 2014 that pointed to 6% or 7% ROE industry-wide.

So we are proud of those numbers that we've achieved. Even on a risk-adjusted basis, those numbers are going to be low- to mid-teens. So very strong ROE and we are committed to maintain a capital structure that enables us to do that.

With that said, we do have a shelf registration outstanding and we'll evaluate capital-raising opportunities when appropriate to make sure that we can support the growth of our Company.

Thank you.

Samir Khare, Capital Returns.

Thanks for the follow-up question. You guys last year, I think, were talking about progressing with TWEA and beef up efforts with them. Can you just tell us about your progress there and potential timing?

Sure. We're excited about the progress that has been made. As you know, it was almost a year ago that Brad and I made a presentation at the TWEA Board meeting and broached the subject of takeout programs to them, which was a new topic.

And that presentation and that idea have set off a chain of events that have resulted in recommendations to the legislature to implement a formal takeout program. They are meeting now in Texas. They only meet once every two years -- the legislature. And we'll see what sort of legislation emerges that would formalize a takeout program for TWEA.

In the meantime, TWEA has implemented their own clearinghouse program, which is fundamentally different than the Citizens clearinghouse program, but nonetheless gives qualified companies an opportunity to selectively take out policies under the clearinghouse for a more firm TWEA.

We are -- we have exchanged data with TWEA. We have analyzed it. We have a lot of policies that we've identified as potential opportunities under this clearinghouse. And we will be sending out letters to agents and policyholders this month identifying those policies and beginning that process.

So we are very excited about it and hope to be able to achieve good results here in the first half of this year on that.

All right, great. And what's the targeted size of that clearinghouse takeout?

I don't want to say at this point. We've got a lot -- it's at 200,000-plus policies in TWEA. We think there are a lot of attractive policies. So it will be substantial.

Great, okay. And just how much homeowners premium are you guys now writing a week? And then if you can tell us how much voluntary commercial residential you guys are doing in the first quarter?

Starting with commercial, we wrote about $900,000 of premium in commercial in the month of January on a voluntary basis, excluding the assumption. And that was almost double our plan. So we've got a very robust pipeline of commercial residential opportunities. And that continues to grow each and every period.

And for homeowners premium -- the voluntary homeowners, what's the rate you guys are writing at there?

It's $30-plus million a month. You know, we are getting both new and renewal. We get over 300 new policies every single day throughout our distribution network.

Okay. And then any thoughts as to when you guys will start writing in Hawaii and New York?

Well, in New York, we just got our license yesterday after a long process. We were really pleased to do that. So we are working on rate filings and forms and that will be coming up in the next few months.

Hawaii -- Family Security had approved rates and forms there. We're looking right now to see if we need to tweak those in any way in order to launch. But I think you can expect to see us launch the product in Hawaii towards the end of Q2 or beginning of Q3.

Great. And with respect to the reinsurance coverage that you guys bought at 1-1, was there any additional coverage that you guys bought or was it just the [sag rate] cover that you guys spoke of earlier?

There was a pro risk cover that we purchased from Gen Re. $2 million excess of $1 million on a per-risk basis. So -- that replaced the 500 ex-the 500 per risk coverage that we had purchased the previous two years.

And we didn't find the pricing on that renewal very attractive, so depending a little more against severity, we are very comfortable with the increase in retention on the per-risk side.

Okay. So the $22 million, excess $3 million, was that just for the Northeast or is that for all ex-Florida?

All states, all perils. It's with Swiss Re. So both Swiss Re and Gen Re represent two new direct reinsurance relationships. We are excited about great companies, great balance sheets. Very comprehensive coverage.

The only thing it really excludes is tropical storms and hurricanes. As designated by the National Hurricane Center.

Great. Thank you guys very much.

Richard Wilson, private investor.

I'd like to ask about doing business in other states. And specifically, Florida is typically thought of as Demotech state. Does Demotech ratings -- are they recognize widely in other states or does this limit or otherwise impact the business you can write in other states or the agencies you work with?

Thank you very much. This is John Forney. I'll take that question. Demotech ratings are widely recognized and have not inhibited our ability to write business in the new states in which we are licensed and writing. That should be clear by the amount of growth that we have been able to achieve in those other states.

As we grow and expand, eventually we will want to have an A.M. Best rating, because certainly, in other parts of those markets, especially more inland parts of the market, A.M Best ratings are more widely recognized and do help expand your distribution channels. But for now, the Demotech ratings have served us very well and has been more than adequate for us to write quality business in the new states in which we are participating.

Great. That's good to know. Thank you very much.

At this time, there are no further questions in queue. I would like to turn the call back over to management for closing comment.

Thank you very much. A lot of good questions today and we really appreciate the interest that indicates in UPC Insurance and what we're doing. I want to thank you all for your participation in the call.

As always, Brad and I are here to answer any further questions or follow-ups that people have and we look forward to 2015 and beyond. So thank you very much, everybody, for your participation today.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time and have a great day.