Kestrel Group Ltd (KG) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Maiden Holdings Limited Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will be given at that time. (Operator Instructions).

As a reminder, this call is being recorded.

I would now like to turn the call over to Noah Fields. You may begin.

Good morning, and thank you for joining us today for Maiden's third quarter 2015 earnings conference call. Presenting on the call today we have Art Raschbaum, Maiden's Chief Executive Officer; along with Karen Schmitt, our Chief Financial Officer. Also in attendance today is Pat Haveron, President of Maiden Reinsurance Limited.

Before we begin, I would like to note that the information presented here today contains projections or other forward-looking statements regarding future events or the future financial performance of the Company. These statements are based on current expectations and future events, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from these expectations. We refer you to the documents the Company files from time to time with the Securities and Exchange Commission, specifically the Company's Annual Report on Form 10-K, and our quarterly reports on Form 10-Q.

Some of our discussions about the Company's performance today will include reference to both non-GAAP financial measures and information that reconciles those measures to GAAP, as well as certain operating metrics, and may be found in our filings with the SEC and in our news release located on Maiden's Investor Relations website. Please also note that unless otherwise stated, all references to common share data in today's discussion are on a diluted-share basis, and comparative comments will refer to Maiden's results in the third quarter of 2015 relative to the corresponding period in 2014.

Finally, certain reclassification have been made for 2014 to conform to the 2015 presentation, and have no impact on net income and total equity previously reported. I will now turn the call over to Art.

Good morning. Maiden continues to generate solid operating earnings and double-digit operating returns, despite a continued challenging environment. During the third quarter and the first nine months of 2015, Maiden has reported operating return on common equity of 11.3% and 11.8%, respectively.

Importantly, we continue to enjoy growth in invested assets and strong year-on-year growth in investment income. While comparative year-on-year earnings and underwriting results have been impacted by adverse commercial auto experience in the Diversified portfolio, we are confident that we are effectively responding to these issues and are well-positioned to continue to profitably expand this segment.

We remain committed to offering our clients highly differentiated customized products and a focus on exceptional service. Our strong long-term relationships and customer-centric approach remain significant competitive advantages.

For the first nine months of the year gross premiums written were up 12% to $2.1 billion, with AmTrust increasing 28%, while the Diversified Reinsurance segment fell 13%. In the US, premiums from the Diversified segment were down, as we continued to feel the impact of the loss of one [life] client earlier in the year, as well as the impact of underwriting actions resulting in non-renewal of several underperforming accounts. As we have consistently communicated, we remain focused on maintaining underwriting discipline.

Despite these challenges, we continue to believe that we're well-positioned to expand our US business. We've added a number of new accounts this year, grown existing client portfolios, and are actively working with a number of prospects which should enable us over time to offset the impact of underwriting actions and the loss of our large client relationship. Our focus continues to be on expanding our highest-margin segments and on developing long-term capital solutions for regional insurers.

We believe that demand for capital support in our target market is growing. In our unique highly-differentiated international insurance services business, which is focused on developing branded consumer insurance products for auto manufacturers and retailers, primarily in Europe; we continue to feel the negative influence of foreign exchange on premium volume, due to the impact of a strong dollar on primarily euro-denominated revenues.

Notwithstanding the influence of foreign currency, we expect this segment to grow in 2016 and beyond, as new OEM clients come online, and as we begin to implement our payment-protection insurance joint venture with Allianz, which was announced in September.

In our newest business activity, which is focused on providing capital solutions to companies in Europe in a post-Solvency II environment, we've made solid progress in expanding awareness, and have developed a significant growing list of prospects. We're currently actively entertaining a number of submissions.

In our AmTrust segment, while growth has moderated as compared to the third quarter of 2014, we continue to enjoy strong organic growth. You may recall that in the third quarter of 2014 we began to see the full impact of the Tower acquisition.

The year-to-date combined ratio for the first nine months is 99.1%, compared to 97.8% in 2014. The main driver of the higher combined ratio is continued adverse development in our US commercial auto excess of loss business. Given an elevated level of loss activity experienced over the last several quarters and as we mentioned during the last earnings call in August, we've now completed a review of our US excess commercial auto reinsurance portfolio. As a result of that review, we further strengthened reserves in the third quarter to recognize what we believe to be increased loss costs in the 2011, 2012, and 2013 underwriting years.

It's important to note that much of the loss development in this quarter stems from our own analysis of our clients' open claims, and in many cases we've posted additional case reserves. From discussions with clients and observing the commentary of others in the market, the issues we are seeing in our excess of loss commercial auto portfolio do not seem to be unique to Maiden. But we're taking the steps that we believe are necessary to mitigate a longer-term impact.

As we've mentioned in the past, by responding quickly to adverse development, we can also ensure that our forward pricing reflects a realistic picture of loss costs. While we've responded with revised renewal terms and conditions, in several cases we either non-renewed or have been unable to come to acceptable terms on some accounts.

Investment income has been a solid and growing contributor to earnings. And for the first nine months of 2015, net investment income has totaled $96 million. That's an increase of 13% from the same period last year. While interest rates continue to be low, we've remained true to our lower volatility strategy, and have not reached for yield or sought greater returns through equities or other alternative investment strategies. We've very methodically grown invested assets. And we've been thoughtful about when to best deploy cash. The continued growth in invested assets is a clear driver of growing earnings power.

Despite a challenging operating environment, Maiden results this year clearly demonstrate the strength of our lower-volatility, highly efficient business model and strong balance sheet. Invested assets continue to grow and drive improving net investment income, while we work to improve underwriting results, which should further benefit operating returns and earnings over time. Notwithstanding our higher combined ratio, we remain confident in our ability to increase our operating returns.

I'd like to now turn the call over to our Chief Financial Officer, Karen Schmitt, to review the third quarter results in greater detail. Karen?

Thank you, Art. And good morning. As Noah said earlier, unless otherwise stated, all references to common share data are on a diluted share basis. And comparative comments will refer to Maiden's result in the third quarter of 2015 relative to the corresponding period in 2014.

Maiden reported third quarter 2015 net operating earnings of $26 million, or $0.34 per diluted common share, compared with $29 million or $0.38 per diluted common share. Net income attributable to common shareholders was $23 million, or $0.30 per diluted common share, compared with $28 million or $0.36 per diluted common share.

Gross premiums written in the third quarter of 2015 increased 1% to $629 million. Net premiums written totaled $599 million in the third quarter of 2015, a decrease of 1%. The net premium decrease is caused by the corporate retrocessional program introduced at the beginning of this year that was not in the comparative period in 2014.

The Diversified Reinsurance segment's net premiums written were down 25% to $164 million. As in the previous quarter, the US premium volume in the Diversified segment continues to be impacted by the loss of a single large customer that was acquired earlier this year. In addition, the third quarter was impacted by the nonrenewal of some accounts in the commercial auto liability portfolio, as well as premiums ceded to corporate retrocessions. However, we've seen a moderate growth of in-force premiums during the third quarter, which is an early indicator of strengthening production volume.

International premium volumes were negatively impacted by the continued strength of the US dollar, causing relative decreases after foreign exchange conversions.

In the AmTrust reinsurance segment, net premiums written increased by 13% to $435 million, reflecting AmTrust's integration of business from the Tower Group acquisition, and steady organic growth. Net premiums earned of $659 million increased 11%.

In the Diversified Reinsurance segment net premiums earned decreased 17% to $193 million. The AmTrust reinsurance segment's earned premiums were up 30% to $465 million. The combined ratio totaled 99.6% in the third quarter of 2015, compared with 97.8%. The Diversified Reinsurance combined ratio was 104% in the third quarter of 2015, up from 98.5%.

As Art mentioned, during the third quarter we completed the comprehensive review of all accounts with significant commercial auto exposures that would be done in the second quarter. The results of that review led us to recognize additional adverse development in the US excess of loss commercial auto business. Although this development was almost half of the impact recognized last quarter.

The combined ratio was also challenged in the quarter by weather losses, specifically from tornadoes reported earlier in the third quarter that exceeded our quarterly cat load by $4 million. Despite the higher than anticipated impact from weather-related losses, we are within our total cat load for the first three quarters.

The normalized combined ratio for the Diversified segment, excluding the prior-year development and above-normal weather-related losses would have been 97.2% for the quarter.

The AmTrust reinsurance segment reported a combined ratio of 95.5% in the third quarter of 2015, compared to 95.6% in the third quarter of 2014. In addition, the group combined ratio in the third quarter of 2015 was impacted by 0.6 points of non-operating losses, mainly stemming from the adverse run-off of the NGHC quota share.

The loss ratio for the quarter was 67.2%, the same as last year. The commission and other acquisition expense ratio was 29.9%, 2 points higher than the 27.9% in the prior year. The higher commission ratio is due to the larger proportion of quota share business in Q3 of 2015 versus the same quarter last year. Also the commission ratio for AmTrust is 1 point higher, due to the smaller proportion coming from the hospital liability contract, which has lower acquisition expenses. The G&A ratio for the quarter was 2.5% compared to 2.7%.

In the third quarter, net investment income was $33 million, an increase of 11%. The average yield on the fixed income portfolio, excluding cash, is 3.44%, up slightly from 3.40% at the end of the second quarter.

The new money yield on fixed maturities in the third quarter was 3.76%, with an average duration of 6.63 years. Including cash, the average duration is 4.6 years versus an average duration of liabilities of 4.4 years. The total investments increased to $3.9 billion, compared to $3.5 billion at year end 2014.

Operating cash flow was $148 million during the quarter, and $525 million year to date. Cash and cash equivalents were $433 million as of September 30, as compared to $309 million at the end of the prior quarter.

During the third quarter we actively invested $219 million in high-grade, high-quality investment-grade bonds. As we continue to generate strong cash flow and grow invested assets, our investment earnings run rate should continue to increase.

Total assets increased 11.5% to $5.8 billion at September 30, compared to $5.2 billion at year end. Book value per common share was $12.28 at September 30, or 3% lower than December 31. Total capital resources remain strong at $1.58 billion.

I am also pleased to say that the Board of Directors increased our quarterly common share dividend by 8% to $0.14 per common share. The dividend increase reflects the continued confidence in our business model and expected future performance. This is the eighth consecutive year that the Board has raised the quarterly common share dividend.

I will now turn the call over to Art for some additional comments.

Thank you, Karen. I'd now like to provide you with an update of market conditions and some closing thoughts. In general, the reinsurance market remains highly competitive. While M&A continues to make headlines in the sector, we don't see the competitive landscape in our markets significantly changing.

A benign cat environment and considerable increase in alternative capital flow to the industry have continued to pressure the property cat reinsurance space, and it has caused some reinsurers to increase their efforts in the higher-frequency, lower-severity segments where we focus.

Outside of the US, Solvency II in Europe and in other markets seeking equivalency with the European standard, have created some new demand for capital as the new risk-based capital rules are implemented beginning in January of 2016. We do anticipate a steady growth in demand in Europe, following the implementation in January.

Despite the challenges of the market, as a disciplined reinsurer, we always compete with a focus on delivering differentiated value to our clients with customized solutions. We continue to refine our underwriting portfolio, and develop new business opportunities in the US and internationally. In a highly competitive environment, we remain focused on strengthening underwriting performance by re-underwriting or non-renewing poor performing accounts, while carefully expanding our underwriting portfolio in our target markets.

We're pleased with the deal flow we're seeing, and we expect to continue expand existing client relationships.

In Europe, as I mentioned earlier, we're further expanding OEM relationships through our marketing efforts and with our partnership with Allianz. We had a very productive fall conference season in Europe, where we continue to increase our profile and are currently holding active discussions around Solvency II-related capital solutions with brokers and potential clients. We're entertaining a number of January 1 opportunities in many European jurisdictions.

And separately, at the beginning of October, a 3-year quota share with AmTrust automatically renewed through June 30, 2019. We're very pleased to continue our longstanding relationship with this important client. And of course we continue to benefit from their ongoing profitable growth.

In today's competitive market, we clearly recognize that there are many formidable and capable reinsurers operating in the market. As a result, our competitive strategy focuses on developing highly-differentiated and client-responsive capital solutions, while effectively leveraging our competitive strengths.

We're committed to continue enhancing the value of Maiden to its shareholders. And in support of that objective, as Karen mentioned, the Board authorized an increase in Maiden's quarterly dividend. We're confident in our ability to further strengthen our earnings and returns, while carefully expanding our underwriting portfolio.

This concludes our prepared remarks. Operator, could you please open the lines for Q&A?

(Operator Instructions) Randy Binner, FBR

Hi, guys. Good morning. This is actually Alex Combs on for Randy. First, I was wondering if you'd give us some detail on the $3.8 million E&S and NGHC run-off business. As this seemed to drive the majority of the beat on our model. How should we think about this business going forward? The line item seems to bounce around a lot.

You know, I think, in the NGHC relationship we're getting kind of in the tail. And so we'll see some volatility. But remember, that was almost a $1 billion of ceded revenue over its life. So on a relative basis, that's a pretty small movement. But obviously we react when we see kind of changes in development.

As we've said before, we still generated margins in that segment, maybe not as high as we'd expected. But we feel like we've got a reasonable handle on the run-off.

Okay, great. Then if I could go to commercial auto, obviously this has been a challenge for the past three or four quarters now. Can you provide some color on the review that you did in the third quarter and what your takes were on that? And should we consider more commercial charges going forward?

A good question, thank you. Well, first of all, as we kind of alluded to in the last quarter, the approach we took was really to physically audit every client that had commercial auto exposure in our contract. And that included on-site visits from our claims professionals. They sort of sampled files of known cases that had already been reported to us. But in addition to that, they sampled the universe of claims that were under our attachment point to see whether there was any possibility that the values on those claims might accelerate over time. So it was a pretty comprehensive review.

In addition to that, where we saw instances where claims in the opinion and estimation of our claim examiners, were comparatively lower than we think they should be. We stepped it up and we posted additional case reserves on our own results. We gave feedback to our clients. But importantly, we made sure that our balance sheet reflected what we believed would be the ultimate settlement of those claims.

And so pretty comprehensive process. That took us to the point where we, as Karen indicated, strengthened our reserves. But I guess the positive is that versus was we saw in the first quarter, we were about half of the amount of additional development in the second.

And looking at sort of 2011 through 2013, we feel pretty comfortable that we've taken a comprehensive look at those segments. You can never be absolutely certain when you're talking about future claim development. But we think our review is as comprehensive as what was possible on our side. And we feel pretty good about our position.

And the question is, is 2014 and 2015, will we see similar effects there? We did see a little bit of impact from 2014. But importantly, our exposure base is actually lower in 2014 than it was in previous years.

Karen, would you like to--

Yes. And just to put some color around it, our first quarter reserve review, which was the basis for our booking in second quarter, was about $19 million for commercial auto. And we had some offsets with some other lines of business. So our total adverse development was lower. But $19-- $19.1 million, I think, was the number for the Q1 reserve review booked in Q2.

So then our Q2 reserve review, which we've booked this quarter, commercial auto was about $10.4 million, so much less. Really focused on those three underwriting years, 2011 through 2013, really with 2011 and 2013 having most of the impact.

We did also look at 2014. And there's a little bit of impact there. But as Art said, our exposure is down, or on an underwriting-year basis, 2014 is down 29% from 2013 on the treaty book, which is where we're having most of the problems. For [FAC], we have had some adverse development, but those combined ratios are still very favorable. In that segment, our premiums for facultative certificate were down about 7%, 2013 versus 2014.

So we're obviously looking very closely at 2014 and 2015 to make sure that we're getting initial booking right. And we'll continue to be very diligent in looking at those segments.

Okay, great. Thanks. That's very helpful. And then is this-- are you seeing frequency and severity? I know in the past, it's been a severity issue. But are you seeing frequency pop up as well?

Well, I mean, it's excess of loss business. So it's sort of by definition it has to be severity. But was are seeing, I guess we calling it frequency of severity that we have more claims than we anticipated, and they're settling for higher values.

Okay. Thank you.

Ken Billingsley, Compass Point

Hi. Good morning. First off, and I apologize if you did comment on this. When you talked about expanding the 3-year quota share agreement, when did that go into effect?

Well, it automatically renews effective October 1st.

It was October 1st? It automatically renews October 1st. Any changes on the ceding commission's sliding scale or any other structure?

Yes, no. There have been no changes. And I should have said the automatic renewal date is October 1st. But it's a July 1, 2016 effective date. So it will automatically renew for three years from that point. But no, at this point, there have been no changes.

No changes, okay. When you say at this point, I'm just curious. Does that mean that there's opportunity for negotiations?

Well, as you know Ken, we work together with our client closely. And from time to time we have made revisions. At this point we have nothing that we have negotiated or would comment on. But we're always looking at ways that we can ensure that the contract is responsive, and at the same time that we're appropriately managing the associated risk.

Sure. And I believe the last time this renewed, am I correct that you guys actually were able to lower the ceding commission slightly on certain pieces of business you were receiving?

It was actually-- what happened was that some of the-- so we pay a flat ceding commission across the portfolio for the majority of the business. And it's a reflection of the average sort of operating and acquisition cost. There are components within the AmTrust portfolio that may have lower expenses, higher loss ratios, and vice versa.

If the component of higher loss ratio or lower expense ratio grows, it does affect our combined, and we were very fortunate to-- and we were very appreciative of AmTrust's ability to work with us and come up with an adjusting feature so that if those kind of lower-expense ratio, higher-loss ratio components became a bigger part of the portfolio, it would automatically adjust.

We terminated that feature probably a couple of years ago, when clearly the Worker's Comp business was outstripping the growth of every other segment. So we really didn't even have this imbalance. But it always gives us comfort that they're always willing to talk with us if we have any issues. And I think they're as interested in us developing value from the relationship as we are in making sure the relationship adds value to them.

Okay. And on AmTrust, I'd like to get just your color, maybe behind the scenes, on-- I understand you guys set your own loss picks for the AmTrust quota share segment, versus what AmTrust does on their books. And you don't necessarily get all of the pieces. But can you talk about some of maybe the internal mechanics and moving parts? I mean they booked, I believe, a 67.9% total for the quarter. Your segment was a 63.9%. Can you talk about what might be driving some of that difference?

Well, I mean I think they said on their call that they made some changes to some European business, some of which we're on, some of which we're not on. They mentioned hospital liability in particular. And that line has a wide range of results. It's on a claims-made basis, but we have very few paid losses at this time. And claims take a long time to resolve. So that one has a pretty wide range of reasonable outcomes on it. And they indicated-- it sounded to me, and of course they don't discuss this with us-- but it sounded to me like they indicated they were moving higher in the range on that business.

And we have also been moving a little bit on that one as well. But as you rightly pointed out, we don't participate in everything that they do. They have some property business in the Lloyd's syndicate that we don't participate in. And it's really hard to-- because we're not comparing necessarily segment for segment, it's pretty tough to see their quarter-on-quarter loss ratios compared to ours.

What we do look at is on an (technical difficulty) business is performing. And understanding that it's getting harder to do that with some of the segments that we're not currently participating in. But as we've continued to look at that, we are very close on an inception to date basis for their net loss ratio versus our AmTrust loss ratio.

The other thing I would say Ken, is keep in mind that when AmTrust makes acquisitions, we typically do not take the in-force. And that includes the Tower. You may remember that they took on kind of the unearned, they fronted for a period of time. And they've made obviously not of that scale, but other acquisitions over that period of time. In the case of Tower that business was higher loss ratio, lower expense ratio. And it obviously didn't get ceded to us. But that certainly creates a disconnect between our results and theirs.

On the European [Med-Mal], you do participate on that though, is that correct?

That is correct, the hospital liability, yes.

Hospital liability, okay. When does the net premium written impact on the diversified re-segment from the loss of that large customer-- when would you expect that impact to end on a quarterly basis? Is it this year or early next year?

First quarter of next year.

First quarter? So it's still going to roll-- we need to make that adjustment?

I would say that the part that's uncertain is obviously is to the extent we write any new business before the end of the year. That could affect it. That could offset it. But yes, I think that's a fair point. We do see though, as Karen said earlier, that on our in-force trend, the trend is upward. So we may not have as big a drop over the next quarter, assuming that in-force trend continues.

And that really reflects the fact that we are writing new accounts. The effect they have on our overall business kind of builds, if you will.

And I forgot to ask this question. So on the European hospital liability, did you book any increase for this quarter?

We did book a higher-- we did use a higher booking rate for this quarter for hospital liability. But it's muted-- you know, you don't see it in the numbers so much. Because the volume really is down. So that the Worker's Comp premiums and some of the other premiums are just so much higher. So you're not really seeing the impact of that. But yes, we've been moving a little higher in the range on that business.

Okay. And then last question I have before I turn it back over is, I believe Karen, you had said that the normalized combined ratio for the Diversified Re-segment would have been 97.2%. And so I did quick math. And it makes it look like that's about $13 million of adverse development in the quarter. And then I believe you said that commercial auto was $10 million this quarter. So can you maybe talk about one, is the $13 million number right? And then what the other $3 million is.

On the Diversified adverse development is $10.3 million. The other difference is the cat impact. So when I said the 97.2% that would have taken out $4 million of cat losses. Because as we said, we were $4 million over our normalized cat load for Q3. On a year-to-date basis, we're right there. We were under the cat load for Q1 and Q2. And then for Q3 we're over.

So I was just trying to normalize. If you put us right at our cat load for the quarter and without the prior-year development that would be the 97.2%.

And I'd just add to Karen's point, I know we've said this many time. But we are not a cat writer. Where we develop exposure is when our property excess accounts, either individually or in aggregation, are involved in the same event. But we very aggressively manage those exposures down to limit the occurrence effect on those.

I appreciate you taking my questions this quarter. Thank you.

Matt Carletti, JMP Securities

Thanks, good morning. I just had two questions. The first one is on the top line in Diversified. I know there were a handful of kind of headwinds in the quarter. And I was wondering if you could either quantify, or if you can't put a direct number on it, just kind of even rank order or ballpark, kind of the headwinds on premium, how much was from that large client? How much would be from kind of the re-underwriting actions going on in commercial auto? And how much might be from FX headwinds?

Okay. Well so starting with the US, US was down 20% prior to the retro. So part of it, on a year-to-date basis, they're down less than 5% prior to the retro. So we do have a pretty big impact from that large account. But the team has offset the vast majority of it through three months. But it's been lumpy throughout the year.

Excluding the impact of the large customer, we would be up on a year-to-date basis. And importantly, in-force premiums at 10/1 are up versus 7/1. So that really tells us that we're going to start to recover some of that lost premium in the fourth quarter. It may still be down for the quarter, but certainly should not be down as far as we were this quarter. And really focusing on those high-margin things, the facultative certificate, the (inaudible), the umbrella, some other things the US is doing. So that's part of it.

IIS, our international insurance services, was down 24%. But it would have been 9% after adjusting for foreign exchange. So more than half of the decline in that business was due to foreign exchange. Because we had obviously a much stronger dollar this quarter versus last year.

Okay. That's pretty helpful. And then in terms of the large client, I know you said it's lumpy. I mean is there any way to-- is it just kind of it comes as it comes, or is there any way to kind of-- is the third quarter for some reason a heavier quarter? I'm just trying to get an idea. Is it kind of even across-- like an even impact? Is there tailing down in Q1? Are we past the worst of it? Or how we should think about that.

Yes. I mean it's not the large client so much being lumpy. It's the new premiums coming in and some of the changes with the existing customers that are coming in. The large client was a quota share. So that tends to come in pretty uniformly. And so we have one more quarter of that. But it's how the new premiums are coming in. If it's an excess of loss account, it's booked for the most part that's going to be booked up front. If it's a quota share, it's going to be booked throughout the year. So that's what really causes the lumpiness, more so than that one customer.

That makes sense.

Said another way Matt, if you think about-- so we had offsets to the account and the non-renewals. But if you forget those offsets, it's probably about 60% of it came from-- in the quarter-- came from the account that wasn't renewed, the company that was sold. And the balance of it was mostly driven by underwriting actions following the valuation of loss costs on the commercial auto side. So a lot of that is a reaction to the loss cost and the effect on pricing as we renew those accounts. And then to a lesser extent, as Karen mentioned, the European currency effect.

Okay. That's helpful. And then just one other question, kind of just a high-level question on kind of the European opportunities that you've discussed. I mean how do you view this quarter versus last quarter? Do you feel better, worse, the same about kind of how the picture looks going forward on that end, and in terms of timing? Should we expect maybe some of that in Q4? Or do you really think it's more of a 2016 event?

I mean we've kind of been kind of positioning, as much more of a 2016 event. We said we might get a little bit of activity in this quarter. But in terms of our relative comfort with it, I would say let's look at the two pieces. There's the auto OEM segment where we have our partnership with Allianz. We feel very confident I think. We have online the first of those opportunities that should take hold in the first quarter.

Now that will ramp up. It won't be automatically-- all the premium we'll generate won't be posted day one. But once that begins, it will be function of the car sales activity of that OEM, and how much of that is financed, and how much of it the company provides credit line for, or PPI for.

So we feel good about that, I think very bullish, first live when coming on board. And we also are bullish about the continuing stream of additional OEMs that will be added, as well as jurisdictions.

Secondly, there's the-- and we've been, I think, cautious about our view with respect to our initiative to provide capital solutions sort of post-Solvency II environment. We had really great reception at Monte Carlo at Baden Baden. We also participated in Spain at a special roundtable that was focused on kind of capital solutions in a post-Solvency II world, what gets capital credit, what doesn't.

And throughout those, we've just gotten very positive reaction. So as the days pass, we seem to see an increase in the amount of submission activity we're getting. And some of them are through reinsurance. But a lot of them are a blend of subordinated debt and reinsurance, which is exactly where we targeted.

So the question still remains, will our terms and conditions be competitive or will our solutions be the right solutions? But we're very gratified and I would say exceeding our expectations in terms of the amount of deal flow we're seeing.

Sounds great. I really appreciate the answers. Thanks.

There are no further questions. I'd like to turn the call back over to management for any closing remarks.

Well thank you very much, everyone, for joining us today. We know it's a busy day for calls. And we look forward to speaking with you in the future. Have a great day.

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