First American Financial Corp (FAF) 2010 Q2 法說會逐字稿

Welcome and thank you for standing by. All participants are on a listen-only mode until the question-and-answer session of today's conference. (Operator Instructions). We would like to remind listeners that copies of First American's second-quarter press release is available on the Company's website at www.firstam.com/investor.

Please note that the call is being recorded and will be available for replay from the Company's investor website and for a short time by calling 203-369-0678.

We will now turn the call over to Craig Barberio, Director of Investor Relations, to make an introductory statement.

Good morning, everyone, and thank you for joining us for our second-quarter 2010 earnings conference call. At this time, we would like to remind listeners that management's commentary and responses to your questions may contain forward-looking statements such as those described on page 4 and 5 of the accompanying news release, and other statements that do not relate strictly to historical or current facts.

The forward-looking statements speak only as of the date they are made, and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Risks and uncertainties that may cause results to differ materially from those set forth in these forward-looking statements and factors that could cause these anticipated results to differ from the described in the forward-looking statements are also described on page 4 and 5 of the news release.

Joining us on today's call will be Dennis Gilmore, our Chief Executive Officer; Max Valdes, Chief Accounting Officer and interim Chief Financial Officer; and Mark Seaton, Vice President of Finance. I will now turn the call over to Dennis Gilmore.

Thank you, Craig, and I would let to welcome everyone to First American Financial's first call as an independent public company. As you know, on June 1, we completed the separation from CoreLogic. The completion of the spinoff was a significant accomplishment for First American and our shareholders.

As we look forward, the Company is well positioned to increase shareholder value, drive efficiencies throughout the business and continue to execute against our strategic plan. In the spinoff, CoreLogic issued to us approximately 13 million shares of its common stock. The value of this investment based on yesterday's closing price is approximately $260 million, and as part of our broader capital strategy we will look to monetize this asset opportunistically over the next few years.

Now turning to the second-quarter results. First American earned $0.32 per diluted share during the second quarter, and this includes $3 million of net realized investment gains, which equals approximately $0.02 per share. The Title Insurance segment achieved a pretax income of $62 million for a pretax margin of 6.9%, and this also includes a net realized investment gain of $4 million.

Closed title orders fell 30% when compared to the same period last year. The decline in orders was partially offset by our order mix shifting to resale transactions, helping to drive an increase in our average revenue per order up to $1565, an increase of 20% when compared to last year. Our open orders remained stable during the quarter as we opened approximately 6300 orders per day in April, 6400 orders per day in May, 6500 orders per day in June.

After the Home Buyer Tax Credit expired at the end of April and as interest rates trended lower during the quarter, the open order mix began to shift towards refinance transactions and this trend has accelerated in July, driving open orders up 8% when compared to June.

Our direct revenues in our Title segment were down 14%, while our agent revenues were up 4% when compared to the same period last year. Over the last few years, we have terminated many underperforming agents, but during the last two quarters we have focused on signing high-quality agents at appropriate splits, resulting in an increase in our agent market share. Our new agent controls continue to lower our risk profile and improve our profitability.

Our commercial title business performed well in the quarter, with total revenues of $61 million, up 17% compared to last year. Workout and distressed properties continue to represent the majority of our activity, but we are seeing an increase and a reemergence of larger sized non-distressed transactions, and this positive trend continued in July. We are becoming cautiously optimistic that this could be the start of a sustainable recovery in our commercial markets.

Revenues in our international division were $91 million, up 13% compared to last year. The growth was driven primarily by Canada where our residential title business continues to strengthen. Our other key European market, the UK, remains weak, reflecting the state of their economy.

Turning to our Specialty Insurance segment, it continued to perform well in both our home warranty and property and casualty lines. Total revenues were $71 million with a pretax margin of 15%. The home warranty business completed a very successful operational turnaround, and both of our lines are continuing to perform well and have good claims experience with loss ratios of just under 50% for the quarter.

Looking forward, our key focus is to continually improve our pretax margin in our Title segment. We continue to manage our workforce to current transaction volume, while driving improved efficiencies across our company. We are making progress on improving our agency splits in key states, and we continue to optimize our direct branch network.

We are pursuing price increases in select states where our returns are inadequate, and we continue to benefit from the lower claims experience driven by stronger underwriting standards in our recent policy years. As a result, we've lowered our current loss provisioning rate to 4.8% for policy year 2010.

With regards to capital management, we will continue to evaluate the size of our dividend, a share repurchase program, capital expenditures, and any potential acquisitions. However, we will be cautious in our approach as we look for greater clarity on the overall health of the real estate market, and we will continue to focus on improving our financial performance.

Turning to our outlook for the third quarter is good. Our order counts remain stable and our commercial activity continues to strengthen. However, as we move out of the traditional home-buying season, we are preparing for lower order volumes in the fourth quarter.

Now that the spinoff is complete, I expect our enhanced focus on our business will accelerate our execution of our strategies to improve our efficiencies while pursuing profitable growth opportunities.

I'd now like to turn the call over to Max Valdes for a review of our financial results.

Thank you, Dennis. On a consolidated basis, total revenues for the quarter were $970 million, down 5% from the same quarter of the prior year. Net income was $34 million or $.32 per diluted share, as compared with $29 million or $0.27 per diluted share in the second quarter of 2009. Results in the current quarter were higher by $0.02 per share due to net realized investment gains of $3 million, while the results for the same quarter of the prior year were lower by $0.13 per share due to $23 million in net realized investment losses.

Turning to the Title Insurance and Services segment, revenues for the second quarter were $903 million, down 6% from the same quarter of the prior year. This decrease was primarily due to a 30% decline in the number of orders closed by our direct operations, offset in part by a 20% increase in the average revenues per order closed and strong agent remittances.

The increase in the average revenues per order closed to $1565 for the current quarter reflected a higher mix of purchase transactions, driven in part by the Home Buyers Tax Credit. Also adding to the increase in the average revenues per order closed was the increase in the mix of direct revenues contributed by our commercial and international divisions, which experienced revenue growth of 17% and 13% respectively when compared with the same quarter of the prior year. The strong agent remittances primarily reflected market share growth in that channel.

Total expenses for the current quarter were $841 million, down 5% from the same quarter of the prior year. Salary and other personnel costs and other operating expenses combined were $469 million, down 9% compared with the same period of the prior year. This decline reflected lower production costs due to the decrease in orders, a reduction in salary and other employee-related expenses, and other cost-containment programs.

The provision for title insurance losses as a percentage of title premiums, escrow and other related fees was 5.8% for the second quarter compared with 6.5% for the same quarter of the prior year. The current quarter rate reflects adverse development for certain prior policy years, offset by a reduction in the expected ultimate losses for policy years '09 and 2010.

The loss provision rate for the 2010 policy year has been reduced to 4.8% in the current quarter, as we continue to see lower than expected claims experience for that year. We anticipate that the Company's financial results will benefit from the lower loss provision rate going forward.

The title pretax margin was 6.9% in the current quarter as compared to 7.9% in the same quarter of the prior year. Excluding the impact of net realized investment gains and losses, the margin decline was primarily driven by the decrease in direct revenues from our residential and default title businesses, offset in part by the relative strength in commercial title, expense reductions and a lower loss provision.

Now moving on to the Specialty Insurance segment, total revenues were $71 million, up 10% from the same quarter of the prior year. Excluding a $6 million impairment charge taken in the second quarter of '09, total revenues in the quarter were essentially flat. Expense control was good, with total expenses down 4% from the same quarter of the prior year, primarily driven by lower claims which continue to benefit both home warranty and property and casualty pretax margins. The specialty insurance pretax margin was 15% in the current quarter, up from 3% in the same quarter of the prior year.

To wrap up, corporate expenses were $16 million in the second quarter, which was roughly in line with our expectation of $60 million on an annual basis.

I will now turn the call over to Mark Seaton, our VP of Finance, for an update on liquidity and our capital position.

Thank you, Max. In terms of liquidity, we currently have $25 million of cash at our holding company. We expect to receive approximately $70 million in dividends from our operating subsidiaries between now and the end of the year. We also expect to make cash payments to the holding company of approximately $55 million, which include our common dividend, interest payments and other obligations. So when you add that all together, we expect to end the year with approximately $40 million of cash at the holding company.

In addition to this cash, we also have $104 million of our $260 million CoreLogic stock investment at the holding company, and $200 million available on our credit facility. So holding company liquidity remains strong, and we will continue to move capital upstream to enhance our flexibility.

Debt on our balance sheet totaled $308 million as of June 30th. Our debt primarily consists of $200 million that we funded on our credit facility in connection with the spinoff, $50 million in trustee notes, and $58 million of notes primarily related to acquisitions.

Our debt to capital ratio as of June 30th was a conservative 14.1%. During the last two years, First American has merged or eliminated 14 underwriter subsidiaries. Collapsing underwriters reduces complexity and administrative costs, but it also frees up trapped capital.

We intend to combine one of our larger underwriters, First American Title Insurance Company of New York, into our primary underwriter by the end of the year. This transaction will free up an additional $170 million of liquidity, and represents yet another step in our efforts to further simplify our operating structure.

We have been working on a few strategies to increase our investment returns. First, simplifying our operating structure has enhanced our ability to put cash to work in the portfolio. Since the beginning of the year, we have invested $80 million of cash into the portfolio. Expect more on this front in the second half of the year as liquidity remains very strong.

Second, we intend to weight the portfolio more towards investment-grade corporate and municipal bonds and away from Treasuries and agency mortgage-backed securities. We made progress on this initiative during the year as we currently have 19% of our fixed-income portfolio in these asset classes, up from 11% at the beginning of the year.

In terms of capital at our title underwriters, we expect statutory capital of approximately $800 million at the end of the quarter. Our premium-to-surplus ratio remains conservative at approximately 3 times, and we believe our statutory capital remains solid.

In terms of share repurchases, we have been evaluating a buyback authorization. However, when instituted, we will be cautious in our approach to repurchasing shares until we feel more confident about the market. We will also weigh buybacks with other uses of capital such as dividends and strategic investments.

At this time, we'd like to open the line up for questions.

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Jason Deleeuw, Piper Jaffray.

Thank you and good morning. The second-quarter pretax title margin, 6.9%, I mean with the order volumes up that we are seeing here in July, do you think it's reasonable that you could at least do that same pretax margin in the third quarter?

Yes, sure, thanks for the question. This is Dennis and I will answer it. We are pretty optimistic moving into the third quarter. Our order volumes are up, but to give you a little color they are shifting to a refinance base set of orders right now. So we think that our orders will continue to rise in the quarter.

Our closing ratios will probably drop a little bit because I think these orders will be a little more difficult to close, and I also think that our average fee per order will drop probably about 5%. Now offsetting some of that change will be, we think, a continued strong pipeline in commercial. So to kind of wrap it all up, we are looking for another good quarter in the third. We do think that we will see pressure in the fourth, though.

Okay, and could you give us the refi mix by month possibly, for like April, May, June and July?

Well, let me start with July. We moved up in July to represent -- about 50% of our orders now are refinance based, and comparing June to July our resale orders were down about 5%, and we think that trend will probably continue as we move forward.

Now when I look back over the quarter, we started the quarter at a refinance mix of about 30%. First month, second month, we went to 35%. June, we went up to 44%, 45%. So you can see it's growing all through the quarter.

Okay. Then my last question, you guys are arguably underlevered, and you mentioned acquisitions. Just wondering if you can give us some more color on that. And also, it just seems with the share repurchase if you seek authorization there, it seems like you are a little -- still playing it a little cautious there. But anything with the debt capital structure right now that would cause you to be cautious on moving forward on any acquisition opportunities that you see?

And can you give us any color on what type of acquisitions are you thinking of? Is it just primarily in the title space or is there stuff out adjacent to the title space?

Sure, sure. Two parts to your question. I think one is about a capital strategy and the second is about acquisitions. So let me start with the capital discussion. As everybody is aware on the call, we are a brand-new public company operating in a still volatile market. So we feel it's in the best interest of our company and our long-term shareholders to be conservative on our capital base coming out of the gate.

We want a few quarters to pass by; we want to see some stabilization in the real estate market ultimately. And when we go through that process, we are going to be very focused on improving our operating performance. But when we step back from that, we understand that we have opportunities for redeployment of our capital. We will continue to reevaluate those opportunities as we go forward.

Now moving to your acquisition question, I think we do have a few gaps in our product offering post-separation. We have some potential gaps that we are looking to fill in our default space and in some of our settlement service products. But again, I'm going to give caution right now that we are going to be very diligent and use our capital wisely here and not -- and make sure that we don't overpay for any potential acquisitions as we move forward. So kind of a cautious approach right now as we move forward.

Okay, thank you.

Brett Huff, Stephens.

Good morning and congrats on a nice quarter.

Thank you.

Can you go through the loss provision puts and takes again? The way I understood it is prior to '09, things got a little worse or you reserved a little more, but you've taken down '09 and '10 to lower, or is it just '10 to lower? Can you just sort of go through that math again for me?

Sure, Brett, this is Dennis. Let me give you some high level detail on this one. A little bit of noise in the quarter to start with, but at the high level we had very good policy development on lost development on years 2009 and 2010. And it is our estimation that those years will ultimately prove out to be one of the highest quality books we have written probably in years, very strong underwriting book there.

Now offsetting that is we had a little adverse development in policy year 2007 and 2008. So that's kind of what's happened in the mix for the quarter.

Okay, that's helpful. Can you give us some detail on any incremental impacts or choices or actions you took on various cost initiatives? I know Mark mentioned some of the other margin initiatives or the investments that you all are working on, but anything on the cost or other operational efficiency side that are notable?

Sure. Just high-level, quarter-over-quarter, I think we had a pretty good success ratio. Our net revenue was down about 8% in the Company, and our expenses were down -- between salary and other operating expenses were down about 9%. So we hit our success ratios kind of quarter-over-quarter, or year-over-year.

Now we look forward, as we always do, we are going to continue to drive for efficiencies across the business. But to just give a little color on the third quarter even though our orders are increasing, we have no intent to add any significant staff.

Actually, we will probably trend down ever so slightly through the quarter. And that's kind of how we approach most of refinance markets. We just don't want to build infrastructure around a refinance boom.

Okay, that's helpful. And then can you -- you mentioned that you were looking for some price increases, it sounds like fairly targeted. I know you had good success last year, mid-year. Can you give us some more color on that?

Sure. Very similar to what I've said on a couple calls, but first, we start overall constantly reevaluating our price structure in all states. And one of our main objectives is to make sure we have an adequate return on our capital. So the bulk of the activity actually occurred last year. We raised prices in about 28 states, for an average of between 5% and 10%.

Now, when we look forward, we are evaluating six or seven states right now that we still think that there is some inadequacy in our pricing. And coupled with looking for some price increases in those states, we are also looking to simplify our structures in our rates. So I think you will see some benefit from price increases in the second half of the year, but it will be much less than what we saw in 2009.

Great. That's all I need. I appreciate your time.

John Bossler, Dominick Brokerage.

Yes, gentlemen, just to follow up on the price increase potentials. The six to seven states that you are evaluating for potential increases, are those states that are significant like California and New York or Florida, or are those more minor states?

Give you a little direction on that. They are not the largest states. I would call them more midtier states.

Okay. And going back to the investment gains and losses on the 6.9% for the quarter versus last year of 7.9%, in the release you stated that the losses reduced last year by 150 basis points and added to your margin this year by 40 basis points. Does that mean if you strip out the realized gains and losses that we are actually at 6.5% this year versus 9.4% last year?

Yes, we are.

So we actually declined by 290 basis points?

Yes.

And just quickly on the -- I noticed the agent premiums increased by $15 million in the quarter, but the premium retained by agents went up by $15.7 million. Are we not getting leverage on the agent side? I know you're trying to make some changes there. Can we expect to see that improve?

Yes, thanks for the question. This is Dennis again. It's an effort that we've been focused on now for the last couple years, and we approach it really twofold. First, we look state-by-state for our return, and we are moving up our agent retention objectives in certain -- mostly eastern states right now.

Now the decrease from a year-over-year perspective is really more of a mix where our business is coming in right now. So we've had a little bit of an increase in some of the western states that typically run it at a full retention.

Okay, and just one last one. Are you going to break out escrow and other closing-related fees on the revenue stream going forward?

Yes, this is Mark Seaton. No, we are not going to break out escrow and other related fees. I mean right now, we break it out direct revenue, agency revenue, and then investment and other income. So we don't have any intentions at this time of breaking out escrow revenue.

Because your competitors do break it out. Is there a reason that we are not going to have that visibility on it?

No particular reason. I guess we've just kind of always done it that way and never had a reason to change in the past. So we just -- we don't really have any intentions of changing it right now.

Could you at least give some guidance as to what percent of the revenue is escrow related and other fees? Because that's going to be more of a constant. Do you know where I'm going with that? In other words, that's more of a constant. Whether you are refi'ing or having a purchase, that's more of a constant.

And I understand your issue. At this point, we are not intending to break it out, but let me take it under advisement and we will maybe give some better clarity as we move forward on that.

Great, thanks so much and congratulations on the spin.

Thank you.

Mark DeVries, Barclays Capital.

Thanks. Dennis, first one is just to kind of clarify the point around capital. Does the improving outlook around both the residential and commercial side have any impact on the pace at which you might look to increase leverage and restructure, or do you want to at least get through the more challenging, the more seasonally challenging fourth and first quarter before you even think about that?

Probably the answer is a little of both. I think they are both primarily related. Definitely the fourth and the first are more challenging quarters. But when we back away just from a quarterly basis, we are looking for clarity on the overall markets. We are optimistic that the bottom has been hit and that we are slowly but systematically improving.

But we just need some time to pass to make sure that the markets are showing the stability we would like them to see. So we will continue to give our investors updates as we go through 2011 on our capital strategies.

Okay. Just to clarify the implications of the comments around the commercial side, it sounds like you are seeing both orders increase and you're also seeing larger loan sizes. Is that right?

That is correct. We have seen a reemergence of actually arm's-length deals that are not distressed base, and we are seeing larger deals come through right now. And like I mentioned in my script, I'll call it we are cautiously optimistic that this market is showing some signs of recovery at a faster pace than we would have anticipated.

Okay. So you have the potential in commercial to have not only higher closed orders but also a higher average fee on those closings, right?

Absolutely. Now your average fee on a commercial would be fairly volatile on a quarterly basis, depending on the size and the complexity of large deals closed. That can cause lumpiness in your average fee on a quarterly basis.

Okay. And then just to the point you made earlier on the residential side about closing ratios potentially being lower in the third quarter, just due to difficulty of actually closing some of these loans. Can you just help us think through what the impact is on your expenses of opening orders but not eventually closing them? Is it just kind of marginal if you don't actually get closer to a close?

No, we will incur a fair amount of expenses as we go through the search and the exam and the issuing of the pre or our product. But let me kind of give a little more color on how we are thinking of closing ratios. We ended the quarter I think mid-70s, % 74% or so as a closing ratio for the second quarter.

And as we look into the third quarter, we think that that ratio may drop mid-single digits. So it's not a material drop, but nonetheless, it will drop because we do think these orders will be longer to close and just flat-out more difficult to close.

Okay, great. Thanks.

Adam Klauber, Macquarie Securities.

Thank you, good morning. On agents, you mentioned the improvement was gaining some market share and that was related to appointing more agents. Could you give us, I guess, some more clarity how many agents have you appointed, and ultimately are you going to continue to appoint more agents, and can we look for continued market share gains?

Well, I can't really comment on future market share gains because we'll have to play that out, but just overall our agent strategy over the last couple of years, we have aggressively gone through our agency book and eliminated underperforming or high-risk agents. Now we've shifted our strategy over the last two quarters to focus on signing net-net new agents that are key for us to keep part of our destination network, and it's critically important at the Company.

So over the last two quarters, we are net-net up a couple hundred agents when you take away the subtractions and the additions. But again, just going forward, we continue to focus on signing high-quality agents across our distribution network.

Okay. So we look to add some more through the back half of the year; is that right?

Again, just limited because we have to net it out against anything we cancel.

Okay. And then another question, you mentioned as you consolidate one of your statutory entities, you are going to free up $170 million of capital. When do you think that will actually -- when will that occur and when will you have access to that capital?

Hi, this is Mark Seaton. We are planning on merging FATICO New York into our primary underwriter, First American Title Insurance Company, our California underwriter, by the end of the year. It might actually get done a little bit before then, but certainly we think we can get it done by the end of the year.

So we will have access to that liquidity hopefully as of December 31st, and we are going to look to try to upstream as much as we can up to the holding company thereafter. Now, of course, we are restricted to the amounts that we can dividend up to the holding company, but it just gives us further flexibility to accomplish our capital management goals.

And once the entities are merged, what is your restructuring going to be?

Well, right now our restriction is roughly $250 million that we can dividend up to the holding company. It changes every year. The calculation is based on the greater of your statutory net income or 10% of your surplus, and so we will have to kind of see what that number is as we enter 2011. But we feel like there will definitely be dividend opportunities in 2011 too.

Okay. Thank you very much. (Operator Instructions)

(Operator Instructions) Nat Otis, KBW.

Good morning. Just a couple quick questions. Personnel expenses look to be down year over year, which is good, but it seems like there could be a little bit more room there to come down further. And just getting a little color on how far you think they could come down in the back end of the year, assuming as you said that Q3 should be solid, but Q4 is actually -- will be tough on a seasonal basis.

Thanks for the question Nat. A little kind of a backdrop here. There's a little bit of noise between our personnel and our other operating expenses between our year-over-year basis. So what we do is we look at them as a combined effort, and that's kind of how we are managing the business overall. We always look at those two as combined line.

We had a little bit of move because of the split, so that's kind of the first background. Second is as we go forward, as I indicated earlier, I think we will trend down slightly. And it will depend on what our overall order counts are. So we will just have to see how the first -- the fourth and the first play out. But like we've always done, we will continue to manage this business very aggressively against our metrics.

Okay, fair enough. Just second question, I know you normally don't comment on legal proceedings or anything, but any commentary on BofA and A, how long this could go on? And B, assuming still everything from a business standpoint continues to flow through normally between you guys, and I would imagine you would expect that going forward still as you work with the Company?

Sure. As I disclosed in our previous 10-Q, in March, Bank of America filed a lawsuit in connection with claims they made on insurance products we issued in connection with HELOC loans that are now in default.

In our answer we filed our responses in April, but also in April we also filed a response against Fiserv who issued these certificates evidencing title on our behalf. So we brought Fiserv into the lawsuit. Since that time, though, we have been working on developing a structure for discussing this dispute outside of the courthouse.

But unfortunately, I can't provide any more detail, but I will give one last comment. As I previously said, we value our relationship with Bank of America both as a customer and one of our largest lenders in the credit facility. And we will give shareholders additional update when we have additional information to pass on.

Okay, thank you.

Jason Deleeuw, Piper Jaffray.

Yes, thanks. I think it's interesting that you are seeing increased nondistressed commercial transactions. I'm hoping to get a little bit more color on that. Are you seeing it; what geographies, what types of properties? Any color that you can provide.

Yes, I can just a little bit, and put it in a perspective too, when we say an increase, we are coming off of very low volumes from 2009, okay? So we are coming from a very low base. Our increases, interesting enough, are coming a lot from the Southwest right now, and they're, I think, opportunistic purchases.

When I say they are full value, they are at far lower values but not distressed properties. And it's across different segments, so I can't just focus in on any one segment. It's across different segments. Again, we are seeing the reemergence here to some degree in the Western states.

Okay, and it sounds like the momentum into July was pretty solid, and generally the third quarter is weak seasonally for commercial. Do you think that the commercial activity can still be up in the third quarter from the second quarter in what you have seen so far this year?

Again, I really can't speculate on that. I mean, all I can tell you is we had a good pipeline building into July.

Okay, thank you.

John Bossler, Dominick Brokerage.

Yes, just two follow-ups, gentlemen. One on the tax rate, it looked to be like 40% versus I guess 46% or 48%, so we got a nice benefit from that in the quarter. What should we be modeling going forward?

This is Max. I think we can actually model this year to be around the 40% to 41% range, and going into next year I think we can reduce that rate. Our goal is to try to reduce that rate to closer to 38% or 39%.

Okay. Between the '09 and '10 book of business being better and a little slippage in the '07 and '08, in looking at the reserves from Q1 to Q2, did we have a decrease of about $70 million? It just looked like on the balance sheet it looked like that went down by about $70 million. Is there any noise with that?

No, there shouldn't be any noise. Obviously, that includes known claims, so it's a combination of claims that we paid out plus the reserves that we are putting up for the current policy years, and then any slight reserve strengthening for the prior years.

Okay, great. Thank you.

Brett Huff, Stephens.

Hi, thanks for taking my follow-up. You had mentioned agent remittances, and I wanted to make sure I understood the dynamic of that. It sounds like they were good in 2Q. Will they -- should we expect a change in that in 3Q and 4Q just from a timing point of view?

No, actually, we are intending that our agent remittances will still be strong, continue to be strong and build probably into Q3. Most of the remittances that are represented in the second quarter are from activity occurring in the first quarter.

Okay.

So we've got the normal lag here.

Okay, that's what I needed. Thank you.

That's all the time we have for questions today. That concludes this morning's call. We'd like to remind listeners that today's call will be available for replay on the Company's website or by dialing 203-369-0678. The Company would like to thank you for your participation. This concludes today's conference call. You may now disconnect.