AXIS Capital Holdings Ltd (AXS) 2004 Q2 法說會逐字稿

Welcome to the Q2 2004 Axis Capital Holdings Ltd. earnings conference call. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Ms. Linda Ventresca, Investor Relations.

Good morning, ladies and gentlemen. I'm happy to welcome you to our conference call to discuss the financial results for Axis Capital for the quarter ended June 30, 2004. Our second-quarter earnings press release and financial supplement were issued yesterday evening after the market closed. If you would like copies please visit the investor information section of our website, www.AxisCapital.com. We set aside an hour for today's call, which is also available as an audio webcast through the investor information section of our website through September.

An audio replay will also be available from approximately 11 AM Eastern today through August 13th. The toll-free dial-in number for the replay is 888-286-8010 and the international number is 617-801-6888. The pass code for both replay dial-in numbers is 172-62041. With me today in our Bermuda headquarters are our speakers John Charman, Axis Capital's CEO and President, and Andrew Cook, CFO.

Before I turn the call over to Andrew I will remind everyone that statements made during this call, including the Q&A session, which are not historical facts are forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements contained in this presentation include information regarding our future investment strategy, growth prospects and financial results and our expectations regarding market conditions. These statements involve risks, uncertainties and assumptions. For a discussion of these risks, uncertainties and assumptions, which could cause actual results to differ materially from our expectations, please refer to the risk factors section of our latest prospectus.

We undertake no obligation to update or revive publicly any forward-looking statements whether as a result of new information, future events or otherwise. In addition, this presentation contains diluted book value per share information which is non-GAAP financial information within the meaning of the U.S. federal securities laws. For a reconciliation of this item to the most directly comparable GAAP financial measure, please refer to our financial supplement which can be found on our website. With that I'll turn the call over to Andrew.

Good morning, everyone. I'd like to spend the first part of this call reviewing our financial results with you and then I'll turn the call over to John. This quarter represented another solid quarter for Axis Capital. Net income, including realized losses, was $141 million for the quarter or 84 cents of diluted earnings per share versus $118 million or 81 cents of diluted per share during the second quarter of last year. We continue to drive shareholder value ending the quarter with over $3 billion in shareholders equity and diluted book value per share on an as if converted basis of $18.76.

Our annualized return on average equity for the quarter was 18.6 percent. Diluted book value per share at quarter end represented a 7 percent increase from year end 2003 diluted book value per share of $17.48. We believe that it is important to highlight this growth in book value in light of the recent rise in interest rates and the negative book value that it's had on a number of our peers.

Our combined ratio was 75.3 percent as compared to 81.4 percent in the second quarter of last year. As a reminder, the second quarter of 2003 included 1 material loss related to the Oklahoma tornadoes. Apart from this event, the decrease was also driven by the continued diversification of our portfolio of business, ongoing conservative reserving, better than expected profitability in short sale lines, and our focus on driving down our overall expense ratio.

Gross premiums written for the quarter were more than $629 million and represented a growth rate of 14 percent over the corresponding quarter in 2003. Net premiums written for the quarter were nearly $488 million growing 8 percent over the corresponding quarter in 2003. On a segmental basis, the growth in gross premiums written breaks down as follows: a 4 percent growth rate in the global insurance segment; an 8 percent growth rate in the global reinsurance segment; a 29 percent growth rate in our U.S. insurance segment; and a 21 percent growth rate in our U.S. reinsurance segment.

Our global insurance segment continues to benefit from its diversification by product and geography and the ever-increasing concern regarding the financial strength of Legacy players. There will always be changes in the mix of business from quarter to quarter based not only on our valuation of the relative opportunities in a given period, but also on timing issues for certain classes of business.

As an example of the timing issue, our specialty risk premiums were down quarter over quarter due to the timing of political risk contracts which do not have standard annual renewal dates. This timing difference was somewhat offset by new European D&O opportunities which represented in excess of $12 million of new premium in the quarter.

Growth in global reinsurance was primarily driven by organic growth from the Bermuda catastrophe reinsurance portfolio. This growth was offset by a reduction in our property pro rata book due to contracted opportunities in Florida as cheaper cover has been introduced by the state hurricane funds. Within this segment we expect the European reinsurance operations first-quarter gross premiums written will represented more than 80 percent of its annual business (ph) production.

After the major 1/1 renewal dates for our European reinsurance unit, there are contract subsides which could be written in any one of the second through fourth quarters and it is difficult to protect with a high degree of certainty the timing of such opportunities. Therefore it will be instructed to evaluate the overall annual growth in this unit in addition to growth in the first quarter.

As an introduction to our U.S. segments, I'd like to remind you that we are now beginning to benefit substantially from the diligent and deliberate buildout of the infrastructure we have put in place. Our U.S. insurance segment continues to perform well and we are very pleased with the quarter-over-quarter growth of 29 percent. As a reminder, the second quarter of last year included canceled rewrite premiums totaling $31.9 million related to our renewal rights transaction for professional lines. These were onetime premiums not repeated in the second quarter of 2004. Our U.S. reinsurance segment continues to perform well with gross premiums written in excess of $63 million as compared to $53 million in 2003.

Getting back to our overall performance, our total net premiums earned for the second quarter of 2004 have increased to $486 million or 45 percent over the same quarter last year. I would now like to spend some time discussing our forwards (ph) reinsurance programs.

In global reinsurance we are in the market every day looking for opportunities to mitigate volatility, enhance earnings, and protect our capital base as our portfolio grows. As a result of our continuous evaluation of outwards reinsurance opportunities we have been able to expand coverage and protect aggregate with high-quality reinsurers. Such purchases are not one-off but part of an overall portfolio management exercise. As a result of these activities we have spent an additional $33 million to expand coverage during the quarter bringing our total spend for the year to $101 million. These purchases necessarily reduce net premiums written and earned with the effect of increasing our underwriting ratios. We have carefully evaluated the risk reward profile of these purchases and are very satisfied with the program.

Moving on to our underwriting results; I would like to note that they quarter was once again marked by generally benign loss activity as evidenced by the group's overall loss ratio of 53 percent for the quarter. Global insurance includes favorable reserve development for the 2003 underwriting year of $18.1 million or 9.2 percentage points in the segment and global reinsurance includes favorable reserve development of $18 million or 11.8 percentage points in the segment. These releases were only related to short tail lines.

In our U.S. insurance segment our business until this quarter has been fairly evenly split amongst property, liability and professional lines. But in this quarter competition in D&O has led to a shift in the balance towards property. In this segment we experienced positive development on the 2003 property account which returned $6.3 million or 7.5 percentage points in the quarter for the segment.

At June 30, 2004 our consistently conservative reserving philosophy has resulted in nearly $1.5 billion in gross loss reserves of which 85 percent is related to IBNR. We continue to focus on maintaining a leading underwriting expense ratio including both acquisition costs and G&A. For this quarter our underwriting expense ratio came in at 22.3 percent, down from 23.1 percent in the second quarter of last year. Operating cash flow continues to be exceptionally strong as demonstrated by the $419 million generated during the quarter. We ended the quarter with total cash and invested assets of approximately $4.7 billion. Total pretax income on our investment portfolio for the quarter was $33.3 million which increased from 31.3 million last quarter.

As everyone on the call is aware, the first 6 months of 2004 have been a very difficult time in the fixed income markets. We have been and continue to be overweight cash as we opportunistically move cash into longer dated securities. We believe that our very conservative strategy with respect to the positioning of our portfolio limited our downside during the approximate 100 basis point back up in rates.

As we discussed last quarter, we continue to invest in collateralized loan obligations. To date we have invested $34 million in these assets to diversify some of our investments away from U.S. high rate (ph) fixed income particularly given the rising interest rate environment and secondly to enhance investor returns. We will continue to evaluate opportunities in this area and expect to make more investments as we identify attractive opportunities.

Other insurance related income was immaterial in the quarter at $156,000. As discussed in previous calls, this amount principally represents the mark to market movements in the value of political risk contract accounted for as a derivative. And during this quarter emerging market spreads were quite volatile ending just marginally down.

Included in our expenses is total non-cash compensation of $4 million after tax or 2 cents per diluted share relating to the expensing of restricted stock and option grants. In the comparable 2003 quarter this amounted to $2.2 million after-tax or 1 cent per diluted share.

Finally, you will no doubt have seen our press release with respect to our upcoming universal shelf registration. We believe that it's extremely important for the Company to have as much financial flexibility available to it as is possible and this filing helps to achieve this goal. At the present time we do not have any intention of drawing down on the shelf; however, this could change if we determine that we need capital for any reason. As part of the shelf filing certain of our founding shareholders have registered their shares; however, at this time we have not been asked to assist them on any take down from the shelf.

As always, we suggest you refer to our financial supplement posted on our website, www.AxisCapital.com, for further detail with respect to our financial results. Now I'd like to turn the call over to John.

Good morning, ladies and gentlemen, and welcome to you all. I'll start with a few highlights for Axis -- most of which Andrew has already stolen my thunder on, but I forgive him -- and then move on to our perspective on market conditions.

We have increased our gross premiums written for the second quarter by 14 percent mainly driven by increased activity from our now fully operational U.S. insurance and U.S. reinsurance segments. Given the seasonality inherent in our reinsurance operations in particular, it is useful to speak of year-to-date metrics. For the year-to-date our total gross premiums written have increased 44 percent over the same period last year and net written premiums by 40 percent. In the second quarter we increased our net income by almost 20 percent, delivering our shareholders an annualized return on average equity for the quarter of 18.6 percent. Even with a backup in interest rates, we have accreted fully diluted book value by over 7 percent since year end.

As for our view of market conditions, firstly I'd like to reiterate my view of the last quarter. We continue to observe pricing in the classes we write which is adequate for the risk we take on across all of our underwriting segments. There continues to be plenty of quality business for us to access globally across our highly diversified productlines which satisfy our requirements.

As many have cited over the last few weeks, there seems to be increasing pricing pressure in some lines, particularly in our insurance segments, from a limited number of major legacy business whose CEOs appear to be on another planet in their understanding of what their underwriters are really up to. However, we are not by any means broadly encountering any rational marketplace and this is particularly evident in the strength of terms and conditions across most classes as well as the continuing discipline of the reinsurance market.

The second quarter is a somewhat quieter production quarter for the specialty lines addressed by our global insurance. Overall we're (technical difficulty) diversity and robustness of this portfolio. We continue to experience price declines in the specialty lines including property and terrorism which are disappointing; but again, these declines are from historically high pricing levels. Our ability to access global business has proven to be a tremendous asset for us, as pricing pressure is not uniform across geography for this business. The trend in our terrorism book of business where we are shifting the balance of the book away from the more competitive U.S. marketplace is an excellent illustration of the value of our global reach. For the 6 months ended June 30, 2003, the gross premium split for our terrorism book was 40 percent international and 60 percent U.S. In the 2004 year-to-date, our terrorism gross premium split is 56 percent international and 44 percent U.S. Our best estimate at this time of where we will end up for 2004 will be somewhere in the region of 65 percent international and 35 percent U.S.

Our political risk business continues to see increased activity, as flows of foreign direct investment pick up globally. Marine hull (ph) rates are beginning to show signs of snippage (ph), and this week we have decided to become much more defensive in our already conservative approach to this class of business. One of our major efforts in the global insurance segment this year has been to diligently expand the breadth of our reinsurance program covering this specialty book of business. This program is designed to substantially mitigate volatility throughout the book. As Andrew mentioned earlier, you're beginning to see that we have made substantial progress on the program as the costs commensurate with lessening potential severity is coming through in our numbers. This represents the natural evolution of our risk management at Axis as we prefer to try to keep as much of the potential for severity loss within our reinsurance units.

At July 1 renewals catastrophe pricing was off on average by 5 to 10 points, but still priced more than adequately. This is not surprising as the expectation was that price reductions at January 1 would be matched. There was no material modification of terms and conditions, although I am reminded of two major examples of nonproperty cat business where this was not the case and we sadly let the business go. Per risk pricing was also down around the same 10 points which is acceptable as higher premium low layers (ph) tend to include the component of experience and the experience has been very, very good.

Our now fully operational U.S. insurance segment benefited from the infrastructure now in place and experienced 29 percent growth over the second quarter of last year. Generally the markets addressed by this segment are healthy. Large property and excess D&O are the exceptions; lines where we are least impressed with some very, very dumb competitors. We have had to let business go in these lines where competitors have become suicidally aggressive. As far as we can tell we are one of the few U.S. carriers that actually pre models cat exposed property business before closing. And, for this reason amongst many others, we can absolutely assert that we remain an extremely disciplined market.

Having said this, on the business we are finding we are still getting pricing and cat exposed property business and smaller accounts which is above our technical pricing floor. As always risk selection is critical here and, with submissions up by more than 25 percent across the book in this segment, we are afforded ample opportunities to harvest good business. Much of this is also attributable to our relentless focus on penetrating an even wider distribution network in the U.S. including our strategically important regional brokers.

Taking a step back from my earlier comment with respect to excess D&O, classes addressed by our U.S. professional lines unit represent a mixed bag at the moment. One thing I can state relatively broadly and confidently for this rather diverse book for Axis is that terms and conditions are firmly holding. Primary pricing is remaining relatively stable for public D&O while the pricing on excess is down 10 to 30 percent in some cases.

Some accounts can support these adjustments due to the substantial price increases of the last few years, but there are many others that cannot. We have let go some of the large account because we will not follow the market down to these levels. In our financial institutions professional lines pricing is up in the 5 to 20 percent range and rightfully so given the market's awful experience with risk in this sector.

Finally, in our E&S casualty and umbrella lines we're maneuvering around the senseless competition who are primarily going for the big-ticket items of products accounts. On the smaller accounts we are focusing on, we see the market as quite stable. Our U.S. reinsurance segment experienced gross premium written growth of 20 percent. We continue to find the U.S. casualty reinsurance marketplace, particularly professional lines reinsurance, attractive; and I've seen no significant deterioration in terms and conditions.

At July 1 we non-renewed half of our renewal book based on price, but still found many new opportunities to grow our book. We are optimistic with respect to the opportunities for this segment going forward as we expect to see primary companies continue to seek to manage their exposures down.

Our ratings and the strength of our U.S. capitalization continue to distinguish us against the limited and declining number of reinsurers who represent acceptable security for casualty reinsurance business. In a number of cases we were the only new market to secure our position on programs that came up for renewal at July 1. The flight to quality continues in our favor. Having discussed the state of affairs of the marketplace, I'd like to briefly touch on my expectations for Axis for the balance of the year.

Regardless of the current volatility within the marketplace, we have adhered since day one to a deliberate business plan established in 2001 and designed not only to create long-term strategic value, but also to deliver one of the leading specialty insurance and reinsurance businesses globally. Furthermore, I do not foresee any changes in market conditions that will materially impact our strategic direction and our view of our growth.

We expect pricing slides to slow as those elements of the market that are acting irrationally and unprofessionally see their financials begin to lag. They are at last beginning to be exposed and their CEO's sound appropriately defensive. We expect our growth for the balance of the year to track more closely to that of the second quarter as the first quarter represents a somewhat anomalous (ph) period. The 1/1 renewal date first full 1/1 production date for our European reinsurance, U.S. reinsurance and U.S. insurance businesses.

We also intend to fill out our reinsurance program covering the specialty book of business in our global insurance segment when we see beneficial opportunities in the marketplace occur with high-quality reinsurers. Of course we cannot make any specific representations now with respect to our loss ratio for the balance of the year, but I will remind you that we have benefited in the year-to-date from low loss activity and it would be imprudent for us to project that forward. What we can say is that we, in conjunction with our independent reserving actuaries, continue to be highly diligent with respect to analysis of our data for prior underwriting years and we continue to reserve the current accident year with the same degree of conservatism that you have seen in our reserving since our inception. We also believe that our total net acquisition costs are beginning to reach a steady run rate and should within a point or so match those for the 6 months to date. Thank you and now we're prepared to take your Q&A.

(OPERATOR INSTRUCTIONS) Dave Sheusi, JP Morgan.

I actually have a few questions, then I'll let somebody else go back (inaudible) circle back around. In your formal remarks you commented on a couple examples of changing terms and conditions. Can you just drill down a little bit on what you're seeing in the market for the first point? And then just some general commentary in Lloyd's. I mean, a lot of those lines of business that you focus on is accessed through the Lloyd's market. Can you give some flavor on how they're behaving? Are they feeling some of the same type of discipline in the market as you are?

I try not to get too public in my comparing us with Lloyd's, so I'll deal with that one first. Quite frankly they're a commoditized market. They fundamentally fail to have what I would consider to be the underwriting expertise that they had for many generations up until the mid-90s. And as such we expect that sort of underwriting reaction from them. They are very cheap, they're highly expensed, they give out far too much to acquire business and they're not necessarily helpful but at the end of the day they serve a purpose because they act as a dust bin for a great many of the specialty business that we actually do not want to either be involved with or wish to look at from a pricing condition point of view.

As far as the terms and conditions generally throughout our portfolio they've been holding up. That's the good thing about it. You've got senseless competition, as I said, in the U.S., but -- and those competitors not only compete on price, they compete on conditions and they will reduce deductibles as well which is nonsensical. Especially when you consider the never-ending deterioration that is occurring within the legacy businesses. But such is life and I hope that with Sarbanes-Oxley their financials will reveal the extent of their underwriting weaknesses a lot more quickly than they previously have done.

But generally I'm very comfortable as an underwriter with the robustness of the terms and the conditions that we're seeing throughout both the insurance and the reinsurance portfolio.

On the senseless competition side, are we seeing it more on the primary or reinsurance?

Primary. It's the reinsurance market I've been extraordinarily pleased with. It's been disciplined. It's held its course and that's the real change from previous cycles because normally a weakening on the primary side has been driven by a weakening by the reinsurers. And so the primary underwriters then just give margins away which have been aided by the reinsurance margins being reduced. This time around it all coming out of the primaries retention. And they're so stupid they don't understand it. That is why we think that the balance sheets will reflect it more quickly. And just as a matter of interest on those primary companies, I see CEOs saying that they won't in any way add business and sacrifice underwriting discipline. You can't sacrifice underwriting discipline if it doesn't exist in the first place.

And on the retention side of things, it appears you've been a pretty active buyer of reinsurance. Is the retrocession market becoming more attractive or is there (indiscernible) there?

I've said throughout my tenure at Axis that we operate in a very different way from most insurance and reinsurance companies in the fact that we portfolio manage on a daily basis and we use reinsurance as a tool to portfolio manage. And we are in the markets on a daily basis trying to exploit opportunities. Sometimes those windows open and they're big and sometimes those windows are small. But when you're in the market day by day you build a jigsaw puzzle over the year that actually allows you to put together a pretty efficient and effective form of coverage. So the market itself has still remained strong. But like all markets, from time to time you get spots of weakness and we exploit them.

Great. Congratulations on the quarter.

Vinay Saqi, Morgan Stanley.

Just a couple quick questions. One, John, if you could just touch on the D&O market in the U.S. a little bit more. It looks like your growth was roughly around -- over 50 percent if you exclude the renewal premium from last year in the professional liability lines. What areas are you competing in and how does that compare? Specifically if you can point out the areas where you're seeing the most competition. And then second question for Andrew just in terms of the investment portfolio. It looked like the duration went up in the quarter. Is this roughly a good run rate that we should look at for the duration or are you guys still looking at extending it further?

Well, Andrew is growling at me because he wants to say something. But if you look at our D&O marketplace, don't forget, we were very lucky to acquire Jack Kuhn and his team who have had an established portfolio of business which was long-standing. So we're still building into that portfolio in a way. But I'll let Andrew comment further.

I'll just make the investment call on that and -- I think the duration at the end of the quarter was 3.3 years, it's moved up marginally from the end of December. As I said during the prepared remarks, we're cautiously putting cash to work in longer dated securities. But I think given the expectations for further rate rises during the course of the year, we'll see the duration tick up a bit, but I wouldn't expect it to go much further than it is now at the 3.3 year level.

I didn't mean to cast off the D&O side, but there is a lot of stupidity in that marketplace. Either by some of the major existing carriers and then some of the new entrants whose capital I find amazing that people can feel comfortable with that level of capital and take on that type of underwriting activity. And I certainly would not want Axis to buy its D&O policy from that sort of type of security. But leave that as it may.

But my point about that particular unit; it is very much long-standing, although it's only been with us for just over 15 months, and they have embedded relationships, not only with the broker distribution network but also with our clients generally. And so we continue to feel -- to feed off of those imbedded relationships. But we are having still, because that market on the excess layers is extremely competitive. We are having to walk away from a number of those relationships.

But there's a lot of business out there. We use -- because of our specialty insurance contacts, we can drive business towards our D&O people. Because you know, you've heard me say before that we have embedded relationships with our global insurance clients who buy a range of products, one of which is D&O. And we cross market substantially. And our clients like that because they see our shop, they know our people, they know the security, they know the consistency and they're happy for us to carve out our own layers within their D&O programs. So we can actually sort of -- in a funny sort of way, step to one side from some of the silliness that we see.

Just one final question on terrorism. If the Terrorism Act here in the U.S. is not passed by year-end and as we go into the early part of 2005, can you just talk about what you think the implications might be for demand of that product as we head into 2005 and I would say the latter half of 2005 where it starts to lap into 2006?

The reason why we have deliberately reduced our exposure to U.S. terrorism is the fact that I believe the major property carriers that are (indiscernible) terrorism coverage really for pretty well nothing nowadays have no understanding of their aggregate liability, their exposure at major city centers and have very little care to actually respond to it. If the government support has been withdrawn there will be an explosion of activity. It will be individually written by the experts in the market such as ourselves, such as AIG, such as Berkshire Hathaway who understand those lines of business. They understand the volatility and we rate that business very carefully and we balance the portfolio.

So I was welcome from not only a business activity point of view, but if you look at the World Trade Center tragedy today and how unexpected that $30 billion loss was; I find it staggering that the industry has slipped back into a position where they have fundamentally no understanding of their terrorism aggregates. And the market seems to allow it. You know that we are completely opposite. We aggregate our exposures day by day, hour by hour and city by city and country by country. I'd like to see it go back into the more professional marketplace and be priced accordingly. I'm staggered that the $30 billion loss has just been ignored in 2 years.

Thank you very much.

Adam Klauber, Cochran, Caronia.

The contribution to IBNR, (indiscernible) the build up in IBNR was higher this quarter than it's been in the past several quarters. Could you talk about that and is that higher level sustainable going forward?

A couple of things drive that, but primarily it's our move into the U.S. marketplace, in particular the D&O marketplace and also the excess casualty we're writing in the states. I think both John and I touched on it earlier; the stage is really now fully ramped up and taking advantage of our platform. So as you write more of those lines of business we necessarily have to put up more IBNR for those lines of business. And I think you'll see that trend continue as we continue to expand our operations in the states.

Okay. A follow-up question. Global insurance loss ratios were up during the quarter compared to several prior quarters and even if you look at it on an accident year basis they're up significantly from a year ago. Could you talk about that?

I think we've spent quite a bit of time on several different calls talking about our conservative loss reserving philosophy in our work with our external actuaries on a quarterly basis. I think an enhance we put into our process this year is trying to build in some rating modifiers into our loss reserving techniques. And so we've talked about there's some softening going in the global insurance marketplace. So if you're going to match what you're writing on the top line with the reserving, you have to take that into account. That's really what's driving the uptick in the global insurance loss ratio as opposed to any particular individual losses.

(multiple speakers) of losses is pretty well steady. We haven't seen an explosion of losses. But naturally we want to take into account rate decreases because we've reserved very conservatively and we have done it from day 1.

Okay. And the level of favorable development -- favorable reserve release we saw this quarter, obviously that's going to jump around catastrophes have been low. If catastrophes remain low for the rest of the year can we expect to see a reasonable level of reserve releases going forward?

As I said, I think every single quarter we set our reserves based on the information you have available to it at that particular quarter end in conjunction with our actuaries. Should there be favorable development in our 2003 year of account, obviously we'll put that back into the account, but it would be inappropriate for me to say at this time that come September, December or next March what those actual results will be. But we'll continue to use the same methodology we used from inception every single quarter in setting our loss reserves.

Thank you very much.

(OPERATOR INSTRUCTIONS) You have no questions at this time.

That concludes our prepared remarks for today's call. Excuse me. Thank you all for joining us today. Any analysts, shareholders or other members of the investor communities should contact Linda with any additional questions you may have at 441-297-9513. And just as a final comment from me, this is a very quiet quarter generally within the industry. So you can see it's very difficult to continue to find realistic commentary about the industry as a whole because it is such a quiet quarter. But as we go through the next 6 months it's going to be very important watching how f the market develops. Thank you, everybody.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.