Fednat Holding Co (FNHC) 2015 Q2 法說會逐字稿

Good morning and welcome to Federated National Holding Company's second-quarter 2015 financial results conference call. My name is Shanelle and I will be your operator for today. Please note that today's call is being recorded. (Operator Instructions).

Statements in this conference call that are not historical fact are forward-looking statements. Without limiting the generality of the foregoing words such as anticipate, believe, budget, contemplate, continue, could, envision, estimate, expect, guidance, indicate, intend, may, might, plan, possibly, potentially, predict, probably, pro forma, project, seek, should, target or will, or the negative thereof or other variations thereon in similar words or phrases or comparable terminology are intended to identify forward-looking statements.

The matters discussed on this call that are forward-looking statements are based on the current management expectations involving risk and uncertainties that may result in those expectations not being realized. Actual events, outcomes and results may differ materially from what is expressed or forecast in forward-looking statements made on this call, due to numerous risk and uncertainties including, but not limited to, the risk and uncertainties described in this conference call, our press release issued today, and other filings made by the Company with the SEC from time to time.

Forward-looking statements made during this presentation speak only as of the date on which they are made, and Federated National Holding Company specifically disclaims any obligation to update or revise any forward-looking statement to reflect new information, future events or circumstances or otherwise.

Now at this time, I would like to turn the conference over to Mr. Michael Braun, Chief Executive Officer and President of Federated National Holding Company. Please go ahead, sir.

Good morning, and thank you for joining us today to discuss Federated National Holding Company's second-quarter 2015 financial results. I'm joined on the call by Pete Prygelski, our Chief Financial Officer.

Our financial results can be found in our earnings press release. I will go over some brief highlights, and then we will open up the line for questions.

Highlights include: 39.2% increase in Florida homeowners' policies to approximately 212,500 as measured against the same three-month period last year. 23% increase in gross premiums written to $132 million as measured against the same three-month period last year; 19.4% increase in book value per share, including noncontrolling interest to $16.86, and a 10% increase in book value per share excluding noncontrolling interest to $15.54, each as compared to December 31, 2014.

I am pleased to announce our business continues to demonstrate strong momentum with solid organic growth in both written premiums and policy count. In addition, Monarch National Insurance Company commenced operations during the quarter and was rolled out to our partner agents in a gradual controlled manner. We remain committed to growing and managing our business in a manner that produces consistent results over the long-term, by working with our partner agents to write sustainable business.

I am proud of this Company, its exceptional management team and employees, and everything we are achieving for our insureds, partner agents and shareholders. We feel the Company is very well positioned for long-term growth and success.

With that, we are glad to open up the call to your questions.

(Operator Instructions) Arash Soleimani, KBW.

Good morning. A couple of questions here. The gross loss ratio improved by about 310 basis points year-over-year. What drove that?

Really it's just the claims. We have lessened -- our book is more focused on homeowners, which has a lower loss ratio over the years. The CGL business has become less and less of our business, which is reserved at a higher loss ratio. That is one reason.

Two, just the frequency and severity and timing of claims, so nothing standing out. We haven't lowered our ultimate loss picks on homeowners. They have been 28.5 for the last, I don't know, last 18 months I would say. So really just a mix of business, I would say.

Is 50% still what you are targeting on a net basis for the full year?

Yes, I said that last call and we stand by that, the 50%.

And on the expense ratio side, the expense ratio looked like it was up year-over-year. I guess what was driving that? It looked like the policy acquisition costs came down, I am guessing because of the ceding commissions. But it looks like the operating and salaries ratios have gone up. So I just wanted to know if there was anything in there driving that.

Well, I'm saying if it did -- you have to remember last year, last year's second quarter earned premium. We didn't have a quota share, so you are taking it over earned premium. I don't know if you're taking it over the gross earned, but if you are taking it over net earned, net earned is impacted by the quota share this year.

And then you are not factoring in -- probably not factoring into revenue quota share profit-sharing of 1.75. So took the ratio, actually, if you took our expenses, backing out loss adjusting expense and took that over total revenue, actually the number is 28%, which is probably the best we have been.

How should we think about the profit-sharing, now that you added another a 10% quota share, what is the new run rate for the profit share under the bigger quota share that you have going forward?

The 10% quota share and how we are going to book and what we are going to book from the experienced account, what we are going to start amortizing immediately, we are not done with that. Again, when we close July, we will have a better indication, but we are going to do it in a similar fashion. We are going to look at the probabilities of us hitting our AOP ratios, and we are going to look at the probabilities of a storm over the next few years, and we're going to take the same approach as we took for the 30% quota share.

So yes, the contingent income in the third quarter is going to be a little higher because we are going to have a piece of the 10% quota share being amortized out of the 24 months, but I don't have a number for you right now.

And is 88% retention with $3 million of new business per week still the run rate that you are seeing?

Yes, that is consistent with what we have been seeing in the last few years and what we are continuing to see.

Then I saw you have about $500,000 of Monarch business this quarter. Do you have any updated thoughts on what that is going to look like over the next few quarters?

Right now, we are still writing approximately $50,000 a week of new premium at Monarch. That will stay low. That will stay low through the balance of 2015. However, it will inch up, I believe, gradually. And I think 2016, you'll see a much more aggressive push with it, because I still believe that program we have launched I would say very softly, in that those rates need to be adjusted.

There's a lot of opportunities in the marketplace that we are not penetrating yet, and we wanted to come in gradually with the program and make sure that we are writing the right business, and seize on other opportunities as they present themselves.

I believe we will have an adjustment on those rates towards the latter half of this year. It is too early to determine what they will be, so that we are more competitive and more spacious within Florida. And I think that will really show its value in 2016. I think production will be significantly higher in 2016, but until then I think the $50,000 a week, you'll see a gradual increase on that perhaps, but not material at this point.

And how significant are the rate changes you are thinking about?

Well, it may come down 5%, 10%, 15%, 20% on average. There are certain geographic areas, certain types of risk, and how the rating algorithm interacts when you have certain variables. So some may come down significantly; some may remain as is and some could go up. But the market that we are penetrating is -- I like to say all of the time we specifically overcut the wood.

We did not want to come in cheap; we did not want to have to adjust rates up. So if we needed a 4-foot piece of wood, we cut this 4.5 to 5 feet with the intention of adjusting rates downward as we saw those opportunities in the market.

We are in the process of identifying where we can do that and we will make those adjustments, and we will put that in with the OIR. And I believe you will see significant growth in 2016.

So we are still in the beginning stage of this. This is very deliberate, very methodical, which is how we do everything. And it is just going to take some time for us to penetrate the market.

Okay. Is there any risk, I guess, like if you're taking some rates down in that 15%, 20% rate at Monarch; is there any risk of having the rates come too close to where the legacy fed net rates are?

Well, two things. I'm not specifically saying that they're going to come down 10%, 15%, 20%. But I know directionally they need to come down, and in some cases significantly, number one. Number two, no. There is a lot of things in the program that are very different than in Federated National's program. There is always the possibility of cannibalizing existing revenue, but I see no danger of that.

I would much rather we cannibalize Federated National's business with Monarch than let any competitor cannibalize Federated National's business or take Federated National's business. I don't see that as a threat. It is absolutely possible that a small percentage of the business may move from Federated National to Monarch National, but I don't see that as a threat.

Our objective is to be in the marketplace for our agents with as many products as possible, with top-level service and to pay claims quickly and fairly. And I think that has worked for us in the past and will continue to work for us in the future.

So will Monarch, though, on average be I guess more a higher rate than Federated National? Is that still sort of the idea?

Yes. I would agree with that statement, in that Federated National is very competitive with risk that has mitigation features; therefore, reducing the need for reinsurance on those risks. So Federated National's rates are pretty competitive on homes that have good mitigation features.

There's a lot of quality risk out there that we want to write that don't have those features that need additional reinsurance; therefore, needs more rate on the policy. And that is the difference between the target that Federated National has and Monarch National.

Then is there any update on the whole situation with analytics and revenue optimization that the OIR was pushing?

To clarify your statement there, we are not using optimization. Our analytics we have been using for an extended period of time. We felt that we were doing things correctly. The department has asked us to stop doing that, which we have. We have filed our analytics with a slight variation to them, as the dialogue with the state. Very slight as it relates to the average annual loss on our reinsurance program. That is pending with the state, and we are hopeful that we will have resolution in the coming weeks, could be months. Can't say yet until it is actually resolved and hopefully approved, but other than that, we have no update.

Okay, all right. Thank you and congrats on the quarter.

Ryan Byrnes, Janney.

Good morning, guys. Just had a quick question on the growth. Obviously, it slowed down a little bit, obviously, from a percentage basis, obviously, as we are getting to larger numbers. But also it slowed down a touch on an absolute basis as well. The top line grew $25 million versus kind of it was trending mid-$30s million last year. Just wanted to see again any sort of color you could offer there.

Yes, Ryan. Federated National does very well in the preferred space, as I described it, those houses that are well mitigated. We will reach saturation point at some point in time on Federated National. So let's just make an argument that there's a $10 billion industry and preferred is, let's say, $2 billion. So as Federated National let's say is at $400 million, $400 million of $2 billion. As we approach $500 million, then you go from 20% to 25% of that space, it is going to be harder and harder to grow.

That is exactly why we launched Monarch, worked with our partners on Monarch starting a year, two years ago; is as that growth slows, as that trajectory slows -- and you've identified it -- as the denominator becomes larger, it is harder for that numerator to show it is as a percentage growth. But in terms of absolute dollar growth, that will become more difficult in 2016, 2017, and so on.

That is why we are extremely pleased with what we are doing with Monarch and very anxious to get that out more aggressively in 2016. But it will be done slowly, methodically and correctly, which takes time. Monarch is much more competitive in the bigger space, which is what I would call a standard space, which it is really hard to quantify, but it may be half of the $10 billion space.

So the opportunity that we could launch Monarch and ramp it up in 2016, maybe if we could grab 10% of that space, that is $500 million of premium. Because once again, these are speculative numbers. However, it's very exciting with what we are doing with Monarch.

Got you, okay. Could you maybe just touch also maybe on the third-quarter trends maybe for new business as well, the first month or so?

Sure. What happened when we turned off the analytics was there was a huge spike in business, and then we had our rule-based underwriting which we reverted to. But as we got the data in but not the analytics, we took about three, four -- I guess it was about six, seven weeks of data, and then we updated some of our exposure management because premium just kept coming in quicker than we had anticipated. And it was coming in at five -- we did over $6 million one week.

And with the updated exposure management, we have since brought it back down to approximately $3 million to $3.5 million. And there is no magical number of that $3 million to $3.5 million. But once again, we don't want to be the fastest-growing Company; we don't want to be the biggest growing Company. We just want to write good-quality profitable business.

For whatever reason, it appears that may be in the $3 million to $3.5 million range. And yet again, we kind of found ourselves back in that range. So that is the current trend that we are seeing.

Okay, great. Thanks for that. And then just my last question is, can you maybe just touch on where stat premiums were and where stat capital stands at the end of the quarter?

Ryan, surplus was $136 million. And we -- I then think we were at $34 million in the holding company in free cash and $136 million in the insurance company.

Great. Thank you, guys.

Doug Ruth, Lenox Financial Services.

Thank you. Congratulations, it is a beautiful report, and thank you for the update as far as what happened in the third quarter.

Could you talk some about how much insurance you have in place now and what your market share is?

Well, in terms of the in-force premiums, once again under the assumption that Florida is a $10 billion market; and if we are allowing $400 million, we are talking about 4%. Now those numbers are very fluid, obviously, but we have a very long runway to go in the Florida space. We are very bullish on Florida, and we see great opportunities there, and that is where we are focusing in on.

We are continuing to grow outside of the state, but once again, that is immaterial into our financial results and really where our focus is.

And could you talk a little bit about the state of the Florida insurance industry and what you see happening currently?

Sure. Florida is -- I would classify the market as obviously very competitive, much more competitive than it was a few years back. However, our focus is on superior service and very competitive product. And we think at the end of the day, that is a winning formula and that is what we are doing.

So we are continuing to grow in Florida. The market is absolutely soft, and that there is competition and a lot of the competitors are loosening underwriting and so on. I don't see that as a threat to what we are doing, and remain very confident that our plan will -- we are going to continue with our plan in the market.

That sounds great. How was about is there any update -- how is the relationship with Allstate at this point?

They are a fantastic partner. They obviously are a material portion of our book of business. They are a great partner. I believe we have 800 and some agents appointed throughout the State of Florida with them, and we are very happy with them and I believe they are happy with us as well.

That sounds great, also. Here is one for Pete. Could you talk some about the investment portfolio and specifically what you are doing in the bond component portion?

Yes. We really haven't changed our strategy over the last, I would say, year or so. The only thing we might have done is we've lessened our allocation to equities probably down to 8% -- probably about 9% of the portfolio. The rest is in fixed income. We haven't moved the duration. It is still about 3.75 years.

The quality of the bonds the same, A- overall rating. I guess the one thing we have changed is we have allocated more to tax exempts. So we are trying to get our total fixed income portfolio to be about 50/50 tax exempts versus taxable. And we would like to go all tax exempts, but there's a credit quality issue so you have to be careful.

Okay, thank you for that. What is the employee count now, Mike?

We are at 265 the last number I have, so it could be plus or minus a few. We are continuing to grow. In terms of attracting new talent, we are able to bring in experienced folks. We are very proud of how we bring people in that are new to the industry in more entry-level type positions, and how they continue to grow within the organization into new positions. So we are attracting people in both sets.

Okay, that sounds good. How is the relationship working with the strategic partners, specifically Crosswinds and Trans Re?

They are incredible partners. I can't say enough good things about them. Trans Re is obviously a huge reinsurer who we value our partnership with them greatly. And in terms of Crosswinds, we work with them quite a bit. They like what we are doing in the Florida space. They are very interested in the Florida space as well. They are a quality partner and I think there's great opportunities for our partnership to flourish for many years.

Okay, that sounds good. How about, is there any additional thoughts about the dividend and any further discussion with the Board on that?

Yes, that comes up frequently and obviously we have capital in the holding company and it is a delicate balance of allocating that capital. Obviously with earnings increasing, people have asked about increased dividends and we do discuss it at the board level and every quarter we as a Board discuss what the dividend is going to be. So I know you personally have been a proponent of increasing that dividend and I am assuming that is why you are asking that and we will reevaluate it at our upcoming Board meeting.

Thank you for what you are doing for the shareholders. It is really exciting to watch a good company with good people do good things for everybody. Thank you for answering my questions.

Thank you, Doug. Have a great day.

Casey Alexander, Gilford Securities

Good morning. Did some of that spike in the business when you turned off the analytics show up in the second quarter? Because I noticed that they gross premiums written for homeowners was $123 million in the second quarter versus $97 million in the first quarter.

We took off the analytics I believe June 8. So for the last three, four weeks of June, I would say that we would have, that a spike of let's call it $1 million a week maybe so let's call it $4 million, $5 million, $6 million in that range so I would say it is immaterial in terms of gross written as well as earned premium but it definitely spiked.

Secondly, the filing that you made back in June said that the rates would decrease by approximately 2.5% on the homeowners policy. Is that statement still consistent with your new analytical program? And if so, would that have some effect on your loss ratios?

The 2.5% was from our most recent rate filing which was withdrawn I'm going to say roughly in March. So that is data from 2014. I think everyone knows our number one expense is reinsurance. Our reinsurance went down approximately 10% so we are always looking to share that savings with our policyholders. So if you assume 30% of our premium as easy math is reinsurance, you could assume maybe 3% additional duration go down to our primary rates to our policyholder. I'm not an actuary and I'm not saying that is the correct number. But I would think that that plus the updated analytics we are going to have a rate filing that may bring rates down I would say mid-single digits perhaps even 5%, 6%, 7%. I don't know that. Once again I'm not an actuary, our actuaries have not indicated that but that is my thought on where I think the rates may go.

Okay. That is great, thanks. Lastly, does the spike in business because it came -- started so late near the end of the quarter and ran into the third quarter, does that affect your reinsurance contract at all because it happened so late in the reinsurance contract negotiation period?

What we do in terms of our reinsurance is we project where we are going to be at September 30, and then obviously when we actually get to September 30, the reinsurance adjusts accordingly. So there is some allowable variance around September 30 that would not impact pricing and then there is some that would impact pricing. So it is too early to say.

Our reinsurance program of $149 million will adjust on September 30. It may go up by maybe with the increased writings. It is too early to say, it could go up to maybe a few million dollars, $5 million or $10 million. It is too early to say. We won't know that until we model our adjustment which was based on what is called AAL or average annual loss. We will know that around the 10th of October but that adjustment off of $150 million if it is in the $5 million or $10 million range, I would not be surprised.

Okay, great. Thanks for taking my questions. I appreciate it.

Samir Khare, Capital Returns Management.

Thanks, good morning. I was hoping that you guys could talk about your decision to increase the quota share to 40% this year? And I was just going to ask, is that the upper limit we should think about getting that quarter share?

Good morning. Great question and I know the hot question is quota share for the last year. We are absolutely not using the quota share for surplus relief. That question comes up continuously. And yes, I understand it is creating a lot of questions on disclosure and accounting and things like that and we are trying to make sure we have everything out there.

But at the end of the day we had the 30% quota share last year which we believe protects our policyholders in the event of a storm as best we can economically and in terms of quality of reinsurance. We had that opportunity to increase the quota share another 10% this year with another partner on our reinsurance program and once again, it has a contingency where we basically get to keep the profit of a quota share when we commute the program.

So a lot of people are very concerned that we are taking the quota share that they look at that as a potential weakness or that we are renting the capital surplus relief. That is absolutely not our intention. It is the ability for us to buy additional reinsurance through a separate capital mechanism from our reinsurance partners.

So I would take it as a sign of strength that our reinsurance partners are willing to do a quota share with us and let us keep the profit. I would call that very unusual that a reinsurer would do that.

So we had the opportunity to expand that from 30% to 40%. We believe it to be correct because it affords protection to our policy holders and is economically in the best interest of our shareholders as well and that is why we increased it from 30% to 40%. The 30% will end next June of 2016 and then the question becomes do we reup it or does it stop and we don't know that answer. Based on the terms that we see in the market is how we will make that decision.

That is a valuable partner that we want to keep on our program that way but clearly when the quota share comes to an end, if there is no storms this year and our AOP does not move, there is a contingency for a profit in there that could be significant. We don't know what that number is going to be. We will know it as we get closer to that date.

But I would take what we are doing in our program as a compliment to the quality of our management team and our staff, what we are able to do with this company and the business that our partner agents are placing with us.

Okay, great and just the additional 10% quota share that you guys initiated this renewal, what is the unearned premium that was transferred with that in Q3?

I don't think we are finished with that computation, the calculation yet but we will get that out soon.

Okay. You guys have said in the past that you guys bind about 12% of your submissions with the fed net subsidiary. Thus far, what you see with Monarch, how much more are you able to capture at this point do you think?

It is too early to say but in a perfect world I would love to see where we go from 65,000 to 70,000 quotes a week and where we are taking 12%. I would think it would be fantastic. I think let's say we cannibalize Federated National down to 11% and Monarch could pick up 6%, 7%, 8%, 9%. That would be fantastic. I don't know that is going to happen but we see there is the possibility that Monarch will afford our agents the opportunity to place more business with us. But right now it is immaterial but with time we think it will be absolutely material.

Actually just going back to the quota share for one second, you guys noted that it was written with a different reinsurer or different reinsurance partners than the 30%. Was there an opportunity to increase with the same partners as the 30%?

The original 30% was with our (inaudible) in Tokyo and everything is always available I will put it that way but obviously the key is always to the economics of it because really we could have commuted the program and there is a lot of math to it. And our new quota share is with Partner Re and they are another great partner on our program. So we think that what we came up with our partner and with Partner Re was economically a good way to go. But there is everything is always available in the market, it is just a matter of what the terms are and what the pricing is so that is how we placed it.

Okay. Is there any reinsurance being bought on Monarch currently?

Monarch, we project that to have -- last count we had about 350 in-force policies. We have what is called the FHCF which is a mandated coverage so that is a 75% reinsurance program. I don't think that reinsurance are modeled one in 100. We are indicating could be as high as $4 million and FHCF could be as much as $1 million. Therefore we did not supply private reinsurance on it so theoretically that exposes those to perhaps $3 million, us and our two partners.

So this current year we did not buy private reinsurance on it but in the future I believe that reinsurance spend and how we look at risk will be very similar to how we look at it in Federated National which is getting quality reinsurance coverage, full indemnity, with quality reinsurance partners and that is where I think we will wind up next year.

And Pete, one for you, the policy acquisition costs going forward with the additional 10% quota share, what do you think the run rate of that should be?

Have you been using 8%?

I don't have my model open, but sure.

It is 10% but the seeding commission is the same thing, the same 25% or 33.84% net, 25% of gross. So and then you are going to have originally when we do the transfer, you are going to have whatever the original portfolio transfer is, you are going to have that amortized over maybe seven months. So it is going to drop a point or so from what you have in your model and then it will go back after that first seven or eight months, it will probably go back to the 8%. So immaterial.

Okay, great. Thank you.

(Operator Instructions). Richard Wilson, Private Investor.

Hi, I have a question regarding assignment of benefit on claims. It is a general Florida insurance question. As you know, it has become or is becoming an issue in Florida and I was hoping you could just give me your experience with assignment of benefits and any problems you may have seen, where if any particular locations it is particularly difficult and how you see this issue working itself out over the next year or so?

Good morning, Richard. Thanks for the question. Assignment of benefits absolutely is in the space of Florida property. I don't know that it is going to go away and the reason I say that is because when you get your prescription filled or you go to your primary doctor or whatever it may be, really that is an assignment of benefits where you are paying your co-pay and who you are working with is going to bill the insurance company.

It has entered the Florida property space and has been abused and really you are seeing an explosion of assignment of benefits. And I don't know that that is going to go away but I think that as it becomes a bigger problem I think the state legislative body it will have to do something about that and I don't know what that answer is.

We are not being severely impacted by it. We are seeing it, it is absolutely in some of the claims that we are getting. And the fraud associated with it is unfortunate because it robs people of money in the sense that it pushes up AOP and makes premium more expensive when it doesn't need to be that way.

But typically some of these fraudsters will go to a house and solicit someone to have their roof replaced and they will take the assignment of benefits and waive the deductible to the insured and then they will subcontract it out to another roofing company.

So it is becoming -- it is big in the marketplace but we are not seeing it as a huge problem for Federated National and then geographically I think unfortunately South Florida and primarily Miami-Dade is known for fraud. I know there was story in 60 Minutes two or three weeks ago where they were talking about Medicare and things like that and yet again talking about South Florida.

In terms of our South Florida exposure, I believe the last number I had was about 20.5% is Tri-County which is Dade, Broward and Palm Beach and those are the percentage of policies that we have. And Miami-Dade it is about 1% of our policy count. So it is not a huge issue but it is definitely something out there. It is another nuance of writing business in Florida so we are very aware and we monitor it but I would not say terribly concerned at this point.

Great, thanks for your commentary. I appreciate it.

Arash Soleimani, KBW.

Just had another question on the quota share. You guys provide those provide those numbers every quarter that compares it I guess having excess of loss and it looks like it is pretty much comes out to be like a wash. So I guess if it is coming out to be a wash number one, is that actually the case? And number two, why go through the trouble if you are kind of getting the same results at the end of the day?

I will answer that question on a micro level. Mike can answer it on a macro level. But you've got to remember as I said, we are accruing $14 million of contingent income which we believe is a conservative number. We originally said when we began the quota share that the contingent account assuming that there were no storms or storms under $100 million, and the AOP didn't blow off, there's about $32 million in that account. We are only booking $14 million of the $32 million right now. So that is why basically that is why it is looking like through the first year that it is breakeven but there is more income to come as long as certain conditions are met.

And a last answer to the other part of the question is this. We have 60+ reinsurers on our program. We have a $1.8 billion reinsurance aggregate program. We have incredible partners and we have three of those partners that are in the quota share. It is their preferred way of doing business and we are very receptive to it and we enjoy it. And at the very least, we are able to complete our program with no increase in costs, no increase in costs . So your question is if there is no savings, why do it? And the answer is if there is no increase in costs, why not do it.

The next step is this, assuming our AOP performs well and assuming there is no storms, when we get to the second quarter of 2016, there will be a profit that we will be able to book in this contingency. What the true net number is we don't know today but it could be significant. And I think your question will be different at that time when we are able to fully realize and book that account, that savings if it is a big profit share that we are able to book.

So the short answer is there is no expense to us doing it. The long answer is I believe it will be even more accretive to us than we are able to recognize today.

I guess can you maybe talk about if actually there is a storm, is it still breakeven or are you worse off since you don't get any of the $14 million potentially?

I think the worst-case scenario is that we are at breakeven. And we know in the last 10 years there has been no storms to hit Florida, no named storms that have resulted in big cat losses. So once again, I believe there is no downside to it other than an analyst like yourself I get it. It is a big thing in our spreadsheet I get it, I understand that.

But once again if we are able to realize a profit in it of whether it is $1 million or $5 million or $10 million or more, that is for the benefit of our shareholders. That is what we are here to do. We are here to absolutely protect our policyholders and service them 100% and absolutely to maximize the value while controlling risk to our shareholders.

So we don't believe it is taking on any additional risk, we are laying off risk and there is the ability to generate additional profit.

All right. Thank you very much.

While we are still on the line just to answer Samir's question, the portfolio transfer on the 10% quota share is about $15 million.

Any other questions that we have, operator?

I am showing no further questions at this time.

I was just going to say thank you very much to everyone who has dialed in today. Thank you very much to those folks with questions. I think everyone knows we enjoy taking questions. I am always available. Pete is always available, our contact information is always out there so don't hesitate with any follow-up questions that you may have. And we look forward to continuing to do what our incredible team here at Federated National does which is continuing to service our policyholders. Thank you everyone and have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.