Greenhill & Co Inc (GHL) 2014 Q3 法說會逐字稿

Good afternoon and welcome to the Greenhill third quarter earnings conference call. All participants will be in a listen only mode. After today's presentation there will be an opportunity to ask questions.

(Operator Instructions)

Please note this event is been recorded. I would now like to turn the conference over to Chris Grubb, Chief Financial Officer. Please go ahead.

Thank you. Good afternoon, and thank you all for joining us today for Greenhill's third quarter 2014 financial results conference call. I'm Chris Grubb, Greenhill's Chief Financial Officer, and joining me on the call today is Scott Bok, our Chief Executive Officer.

Today's call may include forward-looking statements. These statements are based on our current expectations regarding future events that, by their nature, are outside the firm's control and are subject to known and unknown risks, uncertainties, and assumptions. The firm's actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements.

For a discussion of some of the risks and factors that could affect the firm's future results, please see our filings with the Securities and Exchange Commission, including our annual report on form 10-K, quarterly reports on form 10-Q and current reports on form 8-K. Neither we, nor any other person, assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date on which they are made. I would now like to turn the call over to Scott Bok.

Thank you, Chris. The third quarter was a strong one for our firm, as we have been signaling it would be, given an increase in transaction announcements that started in June. Revenue more than doubled versus last year's third quarter, our compensation ratio was at 50%, and we had a pretax profit margin of 33%. This performance allowed us to repurchase some stock, in addition to maintaining our strong dividend, while maintaining a balance sheet with almost no net debt.

Year-to-date, despite a slow start to the year, our advisory revenue is down 3%, our compensation ratio is 55%, consistent with where we were at this time last year, and our pretax margin is 22%, a bit lower than at this point last year in part because of an investment loss we incurred early this year. And our improved pace of transaction announcements, which are indicators of future revenue potential, continued in the third quarter with important transaction announcements involving such leading companies as Cerner, Gannett, MannKind, Masco and QR Energy.

Stepping back to look at the market environment, transaction activity for the year is evolving very much in line with our expectations and consistent with comments made on our last two quarterly calls. Starting with completed transaction activity, as that is the primary driver of revenue for firms like Greenhill, through the first three quarters of the year the total number of completed transactions was effectively unchanged from the prior year, while the volume of completed transactions was up only 9%. Taking a longer term perspective based on the pace of transactions through three quarters, the completed transaction volume for the full year is on track to be about in the middle of the range that has prevailed for the six years since the onset of the financial crisis. In other words, we have yet to see any meaningful improvement in the transaction statistics for completed transactions.

Announced transaction data continues to provide a more positive perspective, one that is indicative of an increasingly active market and bodes well for the future revenue outlook. Through the first three quarters of the year, the number of announced transactions is up 10%, with announced deal volume up significantly more at 49%, driven by an increased number of very large transactions. However, those very large transactions have proven very difficult to complete. None of the 12 largest deals announced this year have yet closed. Four have already been withdrawn, several face significant antitrust scrutiny, one is a hostile bid with an uncertain outcome, and one is a tax inversion that could be impacted by regulatory changes.

The largest deal announced this year that has actually closed, number 13 in announced size, is the $23 billion Actavis Forest Labs transaction on which we advised earlier this year. Despite the challenge in getting very large deals completed, we see this increase in large transaction announcements as boding well for future transaction activity. These announced transactions have the potential to reshape industries and thereby cause other companies to pursue transactions in reaction to a new competitive framework. They can equally be a signal of confidence for the decision-makers evaluating transaction opportunities.

At the very least they have helped put strategic M&A firmly back on the agenda for management teams and boards to a degree that has not been the case since the financial crisis began in 2008. Our sources of revenue through the third quarter are largely consistent with the broader trends, M&A completion fees are down relative to last year, but announcement fees are meaningfully higher. Restructuring has continued to be slow given highly accommodating credit markets, but we have more than offset that with some significant equity financing advisory roles including on spinoffs, IPOs and other transactions. We believe the recent pullback in the high-yield and leveraged loan markets could signal increased opportunities for debt advisory and restructuring assignments next year.

Finally, we continue to see an increase in fund placement revenue compared to last year, attributable to multiple big successes in the real estate area. Looking at activity regionally, we are seeing solid contributions from each of our regions with a year-to-date percentage contribution from each very much in line with last year. Looking forward, activity in our Australian offices is as strong as it's been in some time, with a number of meaningful transaction opportunities in our pipeline for that market, which should play out in the quarters to come. Our European team continues to announce meaningful transactions and win advisory mandates from many of the leading companies in that market. And our North American team is active in what continues to be the most robust transaction environment globally.

By industry sector we are seeing a good level of activity across most sectors, particularly consumer retail, healthcare, and industrials. In summary, this year is playing out in a manner very much consistent with our comments on prior calls this year. M&A activity has improved and we are seeing the benefits of that. But by historical standards, we are in the very early days of an upturn in transaction activity. While headlines generated by a small number of large but controversial deal announcements might suggest that M&A is booming again, the fact is that the volume of actual completed transactions has moved very little despite a tripling of stock market valuations over the past five years.

That suggests to us that a lot of upside remains as deal activity around the world ultimately returns to historical norms. With a strong brand and multiple global markets, we believe we are very well positioned to benefit as that happens. Now back to Chris.

Thank you, Scott. I will address compensation costs, non-compensation costs, dividends, and share repurchases, and only comment here that there are no updates this quarter, or likely going forward, on our very modest remaining principal investments.

Starting with compensation costs. On a year-to-date basis, our compensation ratio is equivalent to the same year-to-date period last year at 55% with lower RSU amortization expense being partially offset by a higher year-end bonus accrual. As we have commented previously, we have consistently achieved our annual goal of a GAAP compensation ratio that is the lowest among our close peers, driven by the high productivity of our people, and we expect to maintain that position for the full year.

Moving to our non-compensation costs. Our third quarter non-comp costs were $15.4 million, equivalent to the second quarter and slightly higher than our third quarter of 2013. On a year-to-date basis our non-comp costs continue to be well under control at $45.1 million, down slightly from $45.6 million in the same period of 2013. Our non-compensation costs have been fairly flat for the past few years and we continue to expect fairly stable non-compensation costs for the foreseeable future.

Putting our two categories of costs together, our costs year-to-date are down slightly in absolute terms compared to last year. Our pre-tax profit margin is 22% year-to-date, reflecting a meaningful improvement from the first half result of 12%, demonstrating the significant operating leverage inherent in our business model as revenue improves, and only down slightly from the 24% achieved through three quarters last year.

Looking at our dividends and share repurchases, our dividend this quarter was again $0.45 per share, consistent with the quarterly distribution made in recent years. During the third quarter we repurchased 212,000 shares of our common stock in the open market for a total cost of approximately $10 million, plus a small number of share equivalents for tax prevalent purposes on the vesting of RSUs. On a year-to-date basis the firm has repurchased approximately 590,000 shares and share equivalents at an average cost of $49.95 per share, for a total cost of $29.6 million.

We ended the quarter with a share count similar to a year ago, and we continue to maintain a share count that is affectively flat with our 2004 IPO, despite significant annual stock-based compensation and our acquisition in Australia, which compares very favorably to both our large and small competitors. We ended the quarter with cash of $36.9 million and debt of $39.2 million. Our Board of Directors has authorized the repurchase of up to $75 million of our common stock through the end of 2014, of which approximately $45 million remains available. The level and timing of stock repurchase activity going forward will primarily be driven by the timing of cash generated in our advisory business. Now let me turn it back to Scott.

Before we take questions let me highlight some of the characteristics that make Greenhill unique compared to our many competitors. Most importantly, we are solely focused on the advisory business. We have senior teams across industries, across geographies, and across types of advice, but in every case they are purely focused on providing advice to clients on their most important strategic needs and are not conflicted or distracted by other business or other products to sell. It is that exclusive focus on the high-margin advisory business that allows us to repeatedly generate sector leading profit margins.

Second, we are the most diversified of our peers by industry sector and by geography, meaning we are not overly dependent on any individual, sector, or region for our continued success.

Finally, an analysis of public transaction announcements demonstrates that a larger portion of our deals fall in the billion dollar or greater category as compared to our peers. That helps us build the kind of brand we want, results in high productivity for our people, and creates greater operating leverage which will pay off as and when the transaction environment continues to improve. With that, we are happy to take questions.

We will now begin the question-and-answer session.

(Operator Instructions)

Ashley Serrao, Credit Suisse.

Good afternoon, guys.

Scott, with respect to your pipeline of [early-stage] assignments that you note in the press release, I was wondering if you could share some high-level color on size and when you expect some of these deals to enter the public domain?

Well, Ashley, it's all pretty hard to say. Obviously at any given time, our pipeline has literally dozens of assignments in place so it's hard to know exactly when things are going to get to announcement let alone to completion.

But, as I said in the comments and in the press release, certainly business continues to be better than it has been for much of the period through the financial crisis and in a pretty broad-based way across industry sectors, and as I also commented, across regions with no kind of one area looking particularly weak relative to the others.

Got it.

And then on fund placement, that business continues to chug along nicely. I was hoping you could share some color on pipelines there and where we are in the fund placement cycle, and your plans for the next leg of growth there?

Well, I think we feel very good about where we are in the real estate business. I mean it's clear that the team we have is -- has already had a good year, so this year is effectively in the bag. I think they have enough substantial assignments in place that we feel very good about next year as well.

One of the things that we have noticed recently in the real estate area as opposed to some of the private equity areas is that funds are being spent really quite quickly. Even funds that may have raised their last fund, it could be quite a large fund, 12 or 18 months ago are already talking about coming back to the market. We're optimistic about getting some re-ups in terms of funds that were quite successful last time around.

That's for broadening it beyond real estate. We continue to evaluate, lots of opportunities, we might do nothing, we might hire a select group of individuals, we might do something larger, and it really just depends on the specific opportunities that come our way.

Great. Thanks for taking my questions.

Devin Ryan, JMP Securities.

Thanks, good afternoon, guys.

Scott, I know you mentioned before the business can be streaky, this is maybe a follow-up kind of on the last question, but the year did start on a slower note for announcements, the past four months have really been as good as I can remember for Greenhill in terms of announcements.

So I'm just trying to get an idea if we should look at the recent pace as a good proxy of kind of what's really going on there? I know you said it's an increasingly active market, or should we just take the comments more in the context of thinking about the announcements in aggregate over the entire year?

Well, okay, again, it's hard to -- it's not a business where it's that easy to predict exactly how quarters, let alone years, are going to roll out. Certainly, we've seen this year that even when people are fortunate enough to get significant deals announced it doesn't always mean they're going to close.

I think what you've seen in recent months from us is kind of indicative of what we expect you know, in general, going forward. I think things in Europe are still very patchy relative to longer-term history, but they're a lot better than they have been at any time since the financial crisis.

As I said, Australia, which went through a little bit of a slower period for us, feels very active, not huge ones but a couple of deals just over the last couple days there. US market continues to be probably the best one around the world.

I can't tell you exactly how to build your model but I can tell you that we're pretty busy here.

I appreciate the color there.

And then just with respect to compensation, I think there's a debate clearly in the industry around what's the right philosophy and what it takes to run a people-heavy advisory franchise, and Greenhill has always been the leader on the comp side and comp ratios and you guys have put up better margins over time than really anyone. That being said, some of your peers appeared to be more willing to subsidize their platforms to a greater degree when activity is maybe a little bit less robust.

From a competitive perspective, how do you guys manage this and maintain the franchise, especially when maybe some peers are being, in your eyes, irrational? And then with respect to the fact that we have been in an extended lull in activity for some time, has your philosophy changed at all in terms of the compensation side of things?

I would say the philosophy hasn't really changed. The fact that we're able to have lower compensation ratio and higher profit margins than all of our peers really is a function of two things.

One is that our people are just literally more productive. If you just take revenue figures and divide by number of total heads for us and others over the last many years, it's a bit higher than others. So, a smaller compensation ratio on a higher dollar productivity per person, that's sort of the same place of where our peers are. I don't think we are at any kind of disadvantage relative to our people and obviously we can benefit our shareholders.

The second big thing, we're only in the one business. There is almost no overhead here. Our CEO, our CFO, our Chairman are out every day doing work for clients, generating revenue for the firm, we don't have a lot of issues with conflicts. We don't have a lot of spending or people involved in going into other businesses or managing other businesses or the conflicts between advisory in those other businesses.

We're kind of a lean team of people all focused on one thing and it's just -- it's not an easy business to manage, but it's probably easier than firms that are a lot more complicated. I think that factors into headcount, which factors into compensation, and that's why I think we can both be competitive in compensation and have the lowest ratio and highest profit margin in our peer group.

Great. Thanks so much, Scott.

Sure.

Alex Blostein, Goldman Sachs.

Thanks. Hey guys, good afternoon.

Scott, one of the metrics that you guys have always focused on when you think about your market share is the growth of your advisory revenues versus the growth rate of the bulge bracket firms or the big bank's advisory revenues. Given the fact that it looks like this year the bigger banks are going to have a decent year, do you still think you'd be able to surpass their growth rate in your business?

You're absolutely right. That's always been a metric for us.

No, I don't think it's realistic given the way the year started for us, that we will have more rapid advisory revenue growth then they did. No. We did that I think for at least five or six years in a row by quite substantial margins. I don't think it's possible to sort of do every year.

There's a certain randomness to whether your clients do deals versus others and the timing to get them announced and done and things like that. So I don't draw any grand conclusions that that trend is over, I think far from it, but clearly this will be the first year out of the last several where we won't have that kind of steady increase we have had for several years in terms of advisory share of the people.

Got you. I guess to your point there is -- there's going to be some level of [choppiness] there.

My second question was around Europe. I think you alluded to that, to just kind of the broader environment there, but given the fact that it is an important market for you guys I was hoping maybe you could spend a little bit more time on how the recent sort of patch of softer, macroeconomic data, concerns around deflation, lower (inaudible) interest rates, all of those things that are impacting people's view of the M&A dynamic there.

I think Europe -- you're right, it's an absolutely very important for us, it was equal to our North American business for many years in our history. Obviously not since the financial crisis.

I think our view is that Europe is clearly in a slower growth mode. I think it probably will be for quite a long time but I also think sort of the severe downside scenarios have kind of -- market's really seizing up and almost like a level of panic and therefore real conservatism at the corporate level setting in, we don't think that's realistic either.

If you think about an environment where it's very difficult to generate topline growth, what often happens is industry consolidation. That's the way to -- if you cut your own costs as far as you can, that's the way to still grow the bottom line is by consolidating your industry. We think we're seeing some of that in Europe, certainly in some of the deals we worked on, and it can be both consolidating your sector and equally it can be selling non-core assets to focus on what you're best at.

We're hopeful for a long-term upturn in Europe. Obviously it's been a remarkably long downturn and only time is going to tell, but we think kind of continued progress -- maybe not always steady but a continued progress toward a more normal market there seems the most likely scenario.

Got it. Understood. Thanks so much.

Brennan Hawken, UBS.

Good afternoon.

Quick question on cash. So it looks like it picked up versus last quarter. Should we think about maybe cash building in the year end due to seasonal needs?

I wouldn't -- frankly, as a shareholder I wouldn't spend a huge amount time thinking about our cash. Obviously, we don't need a huge amount of cash to run the business.

We have had a big string of announcements, obviously, that probably shows up in cash, it also heavily shows up in receivables and, you know, I think we'll manage the cash a little bit quarter to quarter but essentially we're going to continue to return all of the cash flow that comes to the firm after compensation tax and other costs back to shareholders in one form or another.

Okay.

And if we think about the balance sheet in the event that we see sort of more of what we have seen in 2014 versus a dramatic pick up, should we think that probably the debt line would probably creep up or continue to creep up as we move along?

No. I wouldn't expect that. I think if we -- look, we hope not to be in a stagnant environment, we hope and believe that M&A is picking up and there should be a better revenue opportunity for us, but even if it didn't, even if it just kind of flatlined, I would not expect our net debt position which has been roughly zero for a long time to change.

Okay.

And then when we look at the pipeline, at least the publicly visible pipeline, from our perspective, it's sort of come off a little bit here recently in both dollar volume and in number of deals. Does your backlog show a different trend and maybe can you tell us how you're thinking about coming into year end and maybe what the beginning of 2015 looks like from your perspective?

I think it's hard to get much more granular than I have. But I don't, look, I think the way analysts, for a very good reasons, with all of the data that you have, the way you guys measure pipeline, you know, can be lumpy in its own way right? A deal closes and suddenly the pipeline drops and another one gets announced and sometimes they don't have a deal value attached to them because it's not disclosed, and it's not clear how you guys can factor that in.

I think from our perception, business has been pretty good for the last month and, as I've indicated, we still feel like we're working a lot of good stuff that should come to see the light of day in the relatively near term future.

Great.

Then last one, have you heard at all about recent market volatility causing any issues with deals getting closed before year end or causing any concern around deal closings or have we not seen the volatility be protracted for long enough?

I don't personally think there's been enough volatility to have an impact on that. Financing markets are still quite wide open and frankly it's not like we're working on a lot of things that are sort of hugely dependent on extraordinary leverage. Perhaps if people are working on deals for the private equity industry or something they might have more of that, but from our perspective, financing markets are staying strong and so there shouldn't be much of an impact.

What probably volatility impacts is more of the stuff that's still earlier stage, where you might be negotiating a valuation of a company and maybe the acquire or stock is bouncing around and the target stock is bouncing around, it can get more difficult to negotiate a transaction. Those things slow down a little bit, but I certainly don't think sort of one week or 10 days of volatility is changing the way any company looks at a deal.

Had last week's trend continue to spiral down, it might well be looking a little more tenuous right now but obviously markets have yet again bounced back. I don't see any real impact.

Cool. Thank s a lot Scott.

Thank you

Stephen Chubak, Nomura.

So Scott, you noted the recent pullback in leverage lending can actually drive some increased activities in the debt financing or advisory space. I was hoping you could share your thoughts as to whether the pullback there, do you believe it's merely temporary and I suppose separate from that, whether you expect any of the increased regulatory scrutiny of leverage lending activities from the big banks to create a sustained opportunity here?

Well, look, restructuring is another area where we have waited quite a long time to see a bit of a financing crunch that would lead to more restructuring activity. There has been some pullback and certainly you hear some of the big distress that investors talking right now about raising very large funds, they think there's going to be huge opportunities, it's not there yet but they think it's coming. I think that's probably where we are.

I don't think there's been any dramatic change in the market but we have always felt that a lot of capital structures that were over levered at the time of the financial crisis, those companies did various things to really just extend, amend and extend, and kick the can down the road and all of those things people in the restructuring world say when they mean that somebody sort of temporarily solved the problem but didn't permanently solve it.

We think to some extent just through the passage of time, there should be more restructuring activity and if there's some kind of a pullback, doesn't have to be a complete shutdown, but some kind of a pullback in availability it should accelerate that day.

Understood. That' s really helpful.

And then just switching over to the M&A side, I appreciate the context you guys have given in talking, making the important distinction between deal value versus deal count. Certainly supports that notion that we're still in the early days of recovery.

I'm just trying to understand it a bit better, and this question does come up often from investors as well, trying to get a sense as to, given the delay in terms of how long it's taken for the M&A to begin to pick up, how we should think about that in the context of prior historical patterns? Essentially how does that inform your thinking as to which game we're in currently, and then more importantly, I suppose, what is the ultimate length of the game going to be?

Well, that's a really good question. I wish I knew the answers to those.

Look, I think it's been a very long downturn. Historically, you had sort of seven years of strong M&A market and three years of a weaker one every decade. This time we're sort of sitting on seven years of a relatively weak M&A market with some signs from announcements but not completions but maybe it's picking up meaningfully this year. I tend to think when it comes back in a meaningful way it will come back for a significant period of time.

Very little has happened in Europe in the last several years and you have to think that creates sort of a backlog of strategic desire to grow and develop your company. I tend to think it's been a very long time building up, but when it comes there should be, one hopes, multiple years of a good level of activity.

Okay. I know it was a big ask, so I do appreciate the color and thank you for taking my questions.

Joel Jeffrey, KBW.

Just thinking about the comp ratio. I think in the past, you've kind of talked about 50% being sort of the mid-level that you guys would like to get to and in good quarters you'd be below that, and in bad quarters you'd be above that. Should we think about this kind of $90 million revenue number as the line of demarcation for that?

That's probably not real far off actually. Again, going back to the longer-term history, which is now long enough that I think people can, at least to some degree, rely on it, we've been a few points above 50% in weak M&A years and a few points below 50% in strong M&A years. It hasn't varied wildly around the 50%.

I think something like this level probably would be sustainable at a 50% level. Yes.

Great.

Going back to the fund placement business again. I think in the past this has been kind of a seasonally strong fourth-quarter business.

Just wondering if you guys are seeing the same sort of thing? I know you said that the team's kind of got the rest of the year in the bag, just wondering if we'll see heightened revenues in this business for the fourth quarter?

I don't think -- I think I've said this on some of the earlier calls this year. Again, we haven't been in this business enough years to probably draw any grand seasonal conclusions, but we have seen a number of years where it seemed like the closings were very heavily weighted in the fourth quarter.

This year we've been pretty clear from the start that they had a number of things to close in the first and second quarters, final closings including some very large successes. I wouldn't expect the kind of huge percentage of the money comes in the fourth quarter. I think they have done very well this year to bring a lot of that forward with some successful large closings early in the year.

Great.

I'll take one shot at my last question here. You guys said you have been advisor on the largest deal to close, and that closed very early in its current quarter, as you think about the fourth quarter, absent a fee like that, do you feel good about your potential fees for the quarter to kind of get you to a level where you will be consistent with last year's revenue number?

To be honest I didn't even look back at last year, what last year's fourth-quarter revenue number was. Your question obviously is too detailed for us to really give an answer. Every quarter, important thing probably to know from an investor point of view, and this is what makes it maybe hard to predict, I suppose, every quarter is made up of different things.

Sometimes it's of some very long-term, very large things that have been maybe sitting in the pipeline a long time and sometimes it's a lot of smaller transactions, and obviously since you've seen over the years, sometimes it's a lot of stuff that's very visible and public and other times it's things like fund placement fees and smaller, private transactions and restructurings that aren't as visible. We don't -- we try not to feel good or bad about our business with respect to any given quarter but what I've said today I think is that the trendline feels like a good one to us in terms of momentum in the market generally and momentum within our firm.

Thanks for taking my questions.

Thanks.

Vincent Hung, Autonomous.

Good afternoon.

I was wondering if announcement fees and reinvestments have any meaningful impact on the revenue line this quarter?

Certainly, as we've already said and even noted here, that announcement fees are up quite a bit over last year in the year to date. As has been noted even by some of the questioners, we did get a lot of significant transactions that were announced in sort of the June, July, August, September period and certainly yes, this was -- has been a period where announcement fees were a nice contributor for us.

Okay.

Last question is, so there's a large private equity firm that's spitting out its advisory business. I guess, once it's set free of its conflicts of interest, it could be a meaningful capacity to you guys. Do you see them as a threat, or just a reaffirmation of the independent business model?

I take it as a bit of a compliment, that one of the leading private equity firms in the world thought that the best way to set up and get value for an advisory business was to have it be completely independent. I thought it was kind of interesting in that respect.

I don't think we're overly worried about any one particular competitor. Certainly not one that is relatively small and new one that is kind of in early days of building out an M&A franchise. We have plenty of competitors and I don't think that one more independent firm is going to change the mix that much.

Okay. Thanks a lot.

Thank you.

Michael Wong, Morningstar.

Good afternoon.

Just clarifying the compensation ratio question a bit more, so the $90 million revenue level can be looked at as a good level to get to a 50% comp ratio or should it almost be looked at as the three quarter trailing revenue level as a good of a 55% compensation level?

I would look at it -- again, I don't want to get too precise on this. I would harken back to the comment I made, we've been doing this for 10-plus years now and it's been right around 50%, a few points worse in difficult M&A markets, and a few points better in good M&A markets.

The question was, is something like the current quarterly level indicative of where it would settle, right about the middle of the range of 50%. I think that's relatively close. I wouldn't want to get too precise on that.

Obviously that is relative to the current team size, if we hired, increased our headcount by 20%, obviously all of these numbers change. As we sit right now, I think this quarter feels like one that is sort of about in the middle of that range, and that's why we set the comp ratio at 50%.

Okay.

And I was wondering, have you had any difficulty expanding headcount in certain industries without complimentary investment banking businesses such as equity or debt underwriting?

We have never seen that as an obstacle. Obviously our whole business model is built around not being in things like capital markets or asset management and things like that. We wouldn't have that strategy if we thought it put us at a disadvantage. We think there's a lot of demand out there for pure advisory services.

As was noted that is what Blackstone is setting up, so obviously they must think the same thing as well. We respect that others are taking a different point of view and want to be in those underwriting businesses. We just don't think it's a way for us to maximize our opportunity.

Okay. Thank you.

Thank you and I think that's our last question. Thank you all for joining the call and we will speak to you again in a few months.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.