Kemper Corp (KMPR) 2016 Q2 法說會逐字稿

Good morning, ladies and gentlemen and welcome to Kemper's second quarter 2016 earnings conference call. My name is Kevin and I'll be your coordinator today. At this time all participants are in a listen only mode.

Later we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference is being recorded for replay purposes. I would now like to introduce your host for this conference call, Ms. Diana Hickert-Hill, Kemper's Vice President, Investor Relations and Corporate Identity. Ms. Hickert-Hill, you may begin.

Thank you, operator. Good morning everyone and thank you for joining us. This morning, you will hear from two of our business executives, starting with Joe Lacher, Kemper's President and Chief Executive Officer; followed by Frank Sodaro, Kemper's Senior Vice President and Chief Financial Officer. We will make a few opening remarks to provide context around our second-quarter results. We will then open up the call for a question and answer session.

During the interactive portion of our call, our presenters will be joined by John Boschelli, Kemper's Senior Vice President and Chief Investment Officer; Chip Dufala, Kemper's Property and Casualty Division President; and Mark Green, Kemper's Life and Health Division President.

After the markets closed yesterday, we issued our press release and financial supplement. And addition, we filed our form 10-Q with the SEC. You can find these documents on the investors section of our website, www.kemper.com. Please note that our discussion today may contain forward-looking statements. Our actual results may differ materially from these statements.

For information on potential risks associated with relying on forward-looking statements, please refer to our 2015 form 10-K filed with the SEC, as well as our second quarter 2016 earnings release and form 10-Q. This point discussion includes non-GAAP financial measures we believe may be meaningful to investors. In our supplement and earnings release, we defined and reconciled non-GAAP financial measures to GAAP, where required in accordance with SEC rules.

Finally, all comparative references will be to the second quarter of 2015, unless we state otherwise. Now I will turn the call over to Joe.

Thank you, Diana. Good morning everyone and thank you for joining us for today's call. I will start with a few high-level comments and then go through our results.

I am pleased to have new members of our senior leadership team in place now with Mark Green, Chip Dufala and our new Chief Information Officer Charles Brooks joining Kemper. These three are working closely with Frank, John and myself as well as with our other senior leaders, to finalize our strategy.

I also want to thank Joe Metz for partnering with me to lead the Property and Casualty business over these past several months. With his help we continued our actions to improve our results and analyze options for our overall strategy. Now that Chip is here, Joe can return to his focus on leading the Kemper Personal and Commercial Lines business.

As for our strategy, we plan to host a conference call in mid-September. While acknowledging some of you have been hoping to have this discussion earlier, I wanted to get our leadership team in place first. I believe it is important to have our senior leaders involved in shaping our strategy and these executives will be instrumental in delivering the plans we convey. We will announce the specific timing and logistics for the mid-September call in the next few weeks.

Today we will focus our discussion on our second-quarter results. Overall we earned $4 million in net income and $5 million in net operating income during the quarter. Revenues increased to $627 million, largely driven by Alliance United, which we acquired at the end of April last year, and were partially offset by a lower level of realized gains this year.

In addition to the increased level of catastrophe losses we announced earlier, Alliance United losses remain elevated. Though we have a long way to go, we're making progress on the underlying legacy business and we remain diligent on implementing the steps we need to improve our overall bottom line. Our Company catastrophe losses in the quarter increased $13 million to $51 million pretax, with about $2 million of that coming from our life and health business.

Like much of the industry we saw a high volume of storm activity during the quarter, with 14 catastrophic events. The most significant occurred during April in Texas, which we mentioned during our first-quarter earnings call. While the cat losses exceeded our historical annual average, we're comfortable with our long-term pricing expectations. At this point we do not anticipate fundamentally changing our pricing or underwriting actions in the impacted areas for our property-casualty or life and health businesses.

I'll turn now to discuss our Property and Casualty segment results, which provided trends similar to what we saw in the first quarter of this year. Earned premiums for the segment totaled $403 million in the second quarter, up $53 million from last year. Excluding the $64 million lift from Alliance United, earned premiums decreased by $11 million as a lower policy count offset a modest increase in average earned premium.

Our net operating loss of $9 million was down $6 million, driven by a deterioration in Alliance United results and the elevated catastrophes I mentioned earlier. It overshadowed some improvements in our legacy underlying loss ratios and higher level of favorable loss reserve development. With only two months of results for Alliance United included in the second quarter of 2015, year-over-year comparisons are challenging.

We will talk about Alliance United results separately. Alliance United had a net operating loss of $12 million in the quarter. Results including adverse development from the first quarter as well as elevated frequency, which drove the increase in the second quarter underlying loss ratio. Frequency patterns continue to pose a challenge, consistent with what we've seen in the past few quarters.

I will take a few moments to update you on the four key factors we discussed last quarter relative to Alliance United -- elevated frequency levels and need for increased rates, high levels of new business volume and a claims Department that was understaffed to handle the growing business. Starting with frequency, California non-standard auto market continues to experience elevated frequency across the industry. Our experience parallels what many of our competitors have reported. Frequency, particularly in liability, remains pressured.

Our second factor is rate. We implemented a 7% rate increase effective on new business and renewals beginning in April for our Millennium product, which represents half of the book of business. We also filed for another seven point increase on the Millennium product in June and that rate filing is pending approval.

Additionally, in March, we filed for a 7% rate increase on our Gold product, covering the other half of the book. That filing is still pending and we expect to get approval and begin implementing rate increases in the fourth quarter. As we repeatedly said, the process of achieving rate adequacy on both products will take several pricing cycles to complete. In the meantime, we are implementing various underwriting agency management actions to further improve profitability.

Turning to the third factor, production. These underwriting and agency management actions delivered the desired effect. New business is down 20% sequentially, and down modestly on a monthly production basis from last year. We will continue to manage new business flow as we implement needed profitability improvement actions.

Finally our fourth key factor, we remain focused on improving our claims operations. We made substantial progress adding claims adjusters this quarter. Acquiring Alliance United we have added 134 claims personnel at an increase of 36%. We believe we'll be adequately staff based on our staffing model by the end of the third quarter.

We plan to hire beyond these needs to reduce our pending claim count as quickly as possible. We mentioned last quarter we implemented Guidewire for handling Alliance United claims. We changed from Alliance United claim system and claim processes to a Kemper claim system and processes. This change is a necessary part of combining these businesses.

As expected, it will result in pattern changes in our actuarial data. As a result we will experience at least several quarters where interpreting our loss reserving data will be a bit more challenging for Alliance United. This technology integration and operational integration is an important step to position the business for long-term scale and profitability.

Turning now to our legacy P&C business, we had an underlying loss ratio of 65.8%, more than a one point improvement from last year. In our legacy non-standard auto line, we continued to see improvements, earning $3 million in the quarter versus a $3 million loss last year.

Earned premiums increased about $1 million to $79 million, with an increase in average earned premium outpacing a decline in policies enforced. The underlying loss and LAE ratio improved 6 points to 75.8% as our profit improvement actions take affect. While we're pleased with our progress, we still have work to do. We continue to implement rate and underwriting actions.

In our preferred auto line, operating earnings declined $8 million from last year. The current quarter had $3 million higher catastrophe losses and a $3 million lower level of favorable reserve development. The balance of the year over year variance was due to a two-point uptick in the underlying loss ratio to 71.3%.

As we discussed previously, we have seen a shift in the risk profile of our preferred auto book to lower risk business and a related decrease in overall frequency. The industry has experienced increased frequency. Our team is engaged in a deeper review of our mix change, the impact of industry frequency changes, our current claim operations and the adequacy of our pricing at individual risk layers. We are committed to improving the profitability and growth prospects of our preferred auto line.

In our home line, where we saw the bulk of our elevated catastrophe losses, we had a $6 million loss in the quarter, despite benefiting from $9 million of prior-year favorable reserve development. Earned premiums were $68 million, down 6%, however we are encouraged by number of important factors. Our underlying combined ratio improved more than five points to 77.3%, our policy retention percentage increased two points, and our new net written premium increased 7%.

I'll turn now to the life and health business. We reported net operating income of $16 million, up $2 million, driven by decreased expenses, offset by a lower level of net investment income. Expenses were down in the life line as last year's legal expenses were $8 million higher.

Looking at Kemper's performance overall, in the property-casualty business we saw high catastrophe levels, we continue our work to improve Alliance United's performance and we expect it to take a few more pricing cycles at a minimum to resolve, and we're keeping our close eye on preferred auto line and we are encouraged by the underlying trends in our legacy nonstandard auto and home lines. Life and health business continues to produce stable earnings and cash flow to the parent Company.

With that I will turn the call over to Frank to cover Kemper's consolidated performance capital and parent Company liquidity.

Thank you, Joe, and good morning everyone.

For the second quarter, Kemper's net income was $4 million or $0.08 per share compared to $30 million or $0.57 per share, and operating income was $5 million or $0.09 per share, compared to $7 million or $0.13 per share. Casualty losses impacted earnings by $0.64 per share in the second quarter of 2016, compared to $0.46 last year. Results included $1 million of net investment losses in the current quarter compared to $21 million of gains last year.

Last year results also included a charge of $7 million or $0.14 to write off previously capitalized software. Total revenues increased $18 million or 3% as higher earned premiums were offset by lower realized investment gains. Earned premiums of the Property and Casualty division increased $53 million driven by $64 million higher earned premiums from Alliance United, partially offset by lower earned premiums from legacy P&C lines. Earned premiums were stable in the life and health division.

Net investment income decreased $3 million for the quarter primarily from the impact of our alternative investments. Alternative investment income was positive for the quarter but down due to the lower performance of our hedge fund portfolio and underperformance of a few large investments that are winding down.

The total return for the quarter was strong at 3.1% driven by increased values of our fixed maturities related to the drop in interest rates. The pretax equivalent annualized book yield was 5% for the second quarter 2016 compared to 5.4% last year driven by lower income from alternative investments.

The Property and Casualty segment reported a net operating loss of $9 million for the quarter compared to $3 million last year. Both periods were severely impact by catastrophe losses. Additionally, Alliance United's results were far below expectations.

Although Alliance United's prior-year reserve development was marginally favorable, the first quarter of this year developed unfavorably by about $6 million pretax. Further deterioration in our expected loss ratios led to a $3 million pretax charge to recognize policy acquisition costs that would normally be deferred.

Excluding Alliance United and the write-off of our capitalized software last year, P&C results were flat, as better underlying results and higher levels of favorable development offset higher catastrophes. About half of that development came from our more volatile homeowners line and included development from 2014 and 2015 catastrophes.

The legacy P&C underlying loss ratio improved more than one percentage point to 65.8%, legacy nonstandard auto underlying loss ratio improved six percentage points from rate increases, underwriting actions and agency management steps. Homeowners underlying loss ratio improved five percentage points, primarily from lower frequency while preferred auto's underlying loss ratio increased two percentage points as loss trends outpaced rate actions.

Net operating income from the life and health segment was $16 million for the quarter compared to $14 million last year. Results increased primarily from lower legal expenses at the home service companies offset by lower net investment income. Net operating loss from corporate and other improved $2 million primarily from lower pension expense, partially offset by lower net investment income from hedge funds, and the recognition of a tax benefit last year from closing out some open tax years.

I will now cover book value capital and parent Company liquidity. Book value per share was $41.17 at the end of the quarter up 6% from year end, largely from the impact of lower market yields on our fixed maturity portfolio, partially offset by dividends paid. Book value per share excluding unrealized gains on fixed maturities was $34.78, down 1% from year end, primarily from dividends paid.

Statutory surplus levels in our insurance companies remain strong, and we estimate we will end the year with risk-based capital ratios of approximately 400% for our life and health group, and 320% for our legacy P&C group. This week, Kemper's Board of Directors authorized a dividend of $0.24 per share. We were not in the market repurchasing shares this quarter. We will review capital allocation priorities as part of our overall strategy discussion next month.

Our estimate of excess capital remains above $225 million and from a liquidity perspective, the parent Company held cash and investments of about $340 million, while our $225 million revolver remained undrawn. I will now turn the call over to the operator to take your questions.

(Operator Instructions)

Paul Newsome, Sandler O'Neill.

Good morning. Thank you for the call. I want to ask about the reserve development that happened, a little bit more about the reserve development that happened, excluding Alliance United? You gave a little detail but it is like a big number relative to what you've historically done in that line? And maybe we can talk about this stuff, both the homeowners piece as well as whatever else is driving that reserve?

Sure, Paul. Thank you for the question. It was a little jar bolt and someone repeat it to make sure we got it. You want more detail on the reserve development, excluding the impact from Alliance United on the legacy business because it seemed larger than what we have seen normally, correct?

Yes, please.

Okay. I will ask Frank to dig into those details.

Hello, Paul. About half of that development came on homeowners, and a lot of that related to catastrophes from the 2014 and 2015 year. And if you think about it, we have had a lot activity in cats and storms, and those are just harder to peg from a reserve perspective.

Other than that, there was a lot of -- within a reasonable range and mostly positive, so they added up to a larger positive for the quarter. The other thing I would call out is the umbrella which is reported in our other line is also up, and that was due to a few large claims, but still within a reasonable range. It is all within a reasonable range and the outlier we spoke about really was homeowners.

Great. Then, the second question, bigger picture, any update on the strategic plan and the development and maybe timing on the when we hear from you folks?

Yes, Paul. We will get back with specific timing and we will do something in mid-September. We wanted -- I wanted particularly, to have the new senior team members on board and engaged in the process. They will be responsible ultimately for delivering these points of view and I think they are strong individuals with strong points of view and will be helpful in shaping that.

They are here now and they know where the bathroom is, they know where the coffee machine is and they have a strong view of the operations already inside of their businesses. We will have much of that in good shape in the middle of September and we will come back with the timing and specific logistics around the call in a couple of weeks.

Great. Thank you all.

Amit Kumar from Macquarie.

Thank you and good morning. Thank you for the call. Just a few questions, maybe starting with the rate discussion. You talked about the 7% in April and some other rate actions in June? Have there been any actions taken in July and August or not?

Yes, the rate actions, Amit and thank you for your questions and being on the call, the rate actions we talked about where specific to Alliance United. They are California so they are all obviously 6.9% something and we're talking about them at 7%. The first 7% was related to the Millennium product, which is about half of the book. We had a follow-on filing quickly after that one was implemented, and then we had a filing for again that same 6.9% in our Gold product.

We would anticipate once that filing is approved, we will follow on with Gold as well, so we're going to keep those coming and when one is implemented, we'll look at the data and follow quickly along. We obviously have rate filings going in states all across the country in all of our product lines and those are significant. Typically do not go state-by-state, filing by filing in these calls, in this disclosure.

We are doing a little more on Alliance United just because there's a little more hair around that business and a little more challenge and we want to be fulsome in terms of how we are attacking it. We are consistently looking at all of our businesses and looking at their current profitability position, their current position in the marketplace and what we see with frequency and loss trends and then moving appropriately in each of those jurisdictions. There have been plenty of filings in the last two quarters.

So just to understand this clearly, the rate discussion was on Alliance United, but excluding that what you are saying is -- if I understand this correctly -- the other pieces, the non-Alliance United are also seeing rate increases on a state by state basis? Is there a -- many companies give a net rate number, do you have anything to share on that regards or is it too early pending your strategic update?

We do not have one right now to share with you, Amit. Will take that into advisement and perhaps give you something with more specificity in September, going forward. In general, if you look at the filings for us, they are in the high single-digit range.

It is a more nuanced conversation, our legacy nonstandard business has had more profitability challenges so those are at the higher end of that range. Our homeowners business is seeing the most improvement and they are in the single digits as well. There's a couple of states where we feel pretty good, so they're lower.

There are a couple states that need a lot more improvement, so they are at the higher end of that range. It varies. The right way to think about them in general, would be high-single digits.

And those are realized rates, the actual rates, right -- not the file rates?

Well, the comment I am making is about filed and approved. Realize that you have to dig underneath it. The challenge on realized is there is a mix change that comes with these things as well.

We could give you a realized rate and that might not be the appropriate nuanced way to look at this, as you are well aware. If we took a lot of rate on one segment that was particularly profit challenged, and that business left, that might actually be a better answer if the actual yield on the rate was lower than filed, it may have better profitability improvement. So, I think the right way to think about it for us at least, is the filed rate is giving an indication of where we think we are moving from a profitability perspective.

Okay, fair point. The other question was, you briefly mentioned the frequency and severity challenges and you also alluded to the industry? Can you sort of flesh that comment out a bit more?

Reason why I ask, I was hoping to get a better understanding as to, and this is all ex-Alliance United, how your book is performing on the loss-cost-trend side, in terms of paid claim frequency and severity for bodily injury and physical damage? Maybe talk about the trend line because obviously you have seen Allstate and Progressive and you saw what happened with Hartford and I'm trying to figure out where you stack up in that matrix?

Yes, I think what we are seeing, Amit, is trends generally consistent with what we are hearing others talk about. The complicated piece comes for us, and we talked about it a little bit, in our preferred auto line. We firmly believe we are in the industry and we are seeing and experiencing the same issues others are, with more miles driven, with more distracted driving, with all of the other macro trends that are occurring -- we had a fairly significant mix change in the last couple of years.

Which, when we look purely at year-over-year data it might give us the impression that frequencies are down or pushed so the aggregate frequency is less than what we are seeing. As an example, if you went from having a book that was 90% nonstandard to 90% preferred, the frequency for the book year over year would be way down. But the frequency for just the preferred cohorts would be up, and the frequency for just the non-standard cohorts would be up.

Our aggregate number right now would be somewhat misleading to you if we were giving you that, because we are seeing these forces on the individual cohorts working them up, but the aggregate is somewhat down. If that makes any sense on the frequency.

We would expect our loss trends to be very consistent in aggregate for the individual cohorts to be consistent with what others are describing. We are not big enough and we have not been so effective in our underwriting or pricing sophistication that we would expect to be meaningfully favorable to the market.

Got it, and the final question, I'll release you after this -- the strategic update, and I know Paul was asking the same? But should we anticipate either sort of look at it, is that more a scalpel approach which comes out of it? Or are we going to see -- or should we be preparing ourselves for a materially different outline as to how things will function from September?

I am just trying to get an early view and is everything on the table or is it more like -- let's actually get behind the day and understand what is going on. Maybe build up a better data snapshot and the analytics and then figure out what is needed? Can you give us some more color as to what exactly is coming up in September?

Sure. I will give you a little bit, the 60 second version of it. We suffer right now in our organization from a fair amount of execution challenges and in some cases what I might describe as deferred maintenance. Our businesses from an execution perspective are perhaps challenged somewhat by environmental issues, but in many cases by self-inflicted wounds.

You will not or you should expect to see something that is so wholesale radically different that you are saying, boy, on October 1, I can't recognize these guys compared to what I saw on August 1. There is a lot of near-term work that will add a lot of value by stopping the self-inflicted wounds, improving the execution and sharpening our pencils around the businesses we have. We will ultimately -- two years from now, not look exactly the way we look today.

There will be components around that, but the last thing you do when you have businesses that are dealing with self-inflicted wounds and deferred maintenance, is unload them in that condition. There is a significant amount of improvement we can do to get them ready to deal with that, and there is great performance opportunities inside of these businesses we have not dealt with. So we are going to work on all of those.

Could that also include looking at an employee base in the sense that, do you have the right people running all of the pieces of the ship? Or is the management, as well as the leadership sort of percolates down the Company, is that set for now?

Amit, the obvious answer in this is we are going to sit down and look at how to get ourselves structured and positioned to execute better to add value to build competitive advantages and to ultimately build shareholder value. We are not going to be stuck in locking anything in place that would inhibit that ability. I appreciate your question, it is perhaps asking it with a lot of precision out of context of the other components. What I can assure you is, we're not going to lock anything in ahead of time that is a tactical decision, ahead of understanding what we're trying to do overall.

Got it. Okay. I will stop here. Thank you for your patience and the answers. And good luck for the future.

Of course. Thank you, Amit. Appreciate the questions.

(Operator Instructions)

Ryan Byrnes, Janney.

Great, thank you, good morning everyone. Obviously cat losses in the homeowner segment has been elevated the first half of the year, and you mentioned you got more unluckiness than anything else but if you -- I know you're not going to re-underwrite the book, but if you looked at maybe buying more tactical reinsurance programs to maybe take out some of the volatility?

We have, Ryan and we always look at it. The issue on some of that is, it is an insurance transaction. We could do that and take out some of the volatility and we would also be taking out some of the profitability in that component. Somebody on the other side of the trade is going to be looking for that.

Our view all the time, as good underwriters and good stewards of capital, is to say, what volatility can we take, what is the risk-reward of the insurance transactions we are taking and are we getting paid for the risk? Long-term, when we are dealing with any particular component I would expect to have, as an example, and it is a roughly good example because we are not doing homeowner business in Florida, but you would expect your ex cat Florida homeowners to make a lot more money than you would in ex cat Minnesota homeowner's book.

You are getting paid for the risk and you're getting paid for the volatility. We look to deal with that overall, and then our bigger issue in some cases may need to be spreading the risk. We have some pockets of concentration that individual trade might be a good trade, but we actually would be much better served by growing in some other geographies with comparable risk profiles to leverage that capital base more effectively.

I think that is a better way for us to handle this rather than laying off -- coming down to low level attachment points on tactical reinsurance and pushing the profitability lower.

Got you. Thank you for that. The other question I had, in the 10-Q, there seems like there is updated commentary on the Death Master File issue where it says you may use it voluntary in some states on a retroactive basis? Just wanted to see if you could give more color on that?

Sure, happy, too. We have are ready started using the DMF on a prospective basis for new business. Our sense is -- maybe two main points, one -- maybe it is three, there is a clear recognition that you should not go back, the government should get involved in retroactively changing contracts. That is bad for business overall and is clearly unconstitutional, and not a good way to move around.

Point two is that the folks in the industry, the businesses, the companies that are using the DMF asymmetrically, to stop paying annuities but at the same time were not paying life claims to the same insured. That is just -- whether it was an accident or whether they did not know it, whatever it is, you cannot look at it and do anything else other than say that as unworthy behavior, unworthy of our industry and it makes the whole process for all of us look bad. And we understand why those folks entered in settlements and why they were punished, and get it, and that seems appropriate.

We also, as a third point, understand there are databases and there are tools and there are items which on a relatively simple basis could be used to see if a benefit or an insured had passed away and died, there would be a benefit available to pay for beneficiary. I do not think we have ever been fundamentally opposed to exploring that concept. What they challenge has been is we have been dealing with many regulators or treasurers or legislators who were looking for a one-size-fits-all approach.

Let's deal with everybody the same way we're dealing with the group who was getting punished. That, we struggle with. I am fine if you get caught speeding and you get a speeding ticket you paying the fine -- but I am not so fine that if we weren't speeding, we also pay the fine.

I think there's an opportunity here, and we have been exploring it but having some challenges getting anyone to agree to a solution that works for folks who are not causing or who did not do the unworthy behavior. And, we will continue to explore and look at these and may very well come to the conclusion we are going to do what we think makes sense for the business and for consumers and work with that.

Got you. Thank you for that. That is a great answer. Quickly, if I can sneak in one additional one?

Can you maybe break out what they loss cost trend is at Alliance United? I realize you are getting nearly 7% and pushing for more, but I want to see where loss cost trend is in that book so we can see what kind of impact those rates should get for you?

The frequency trends are running high single digits. The severity trends are almost hard to read right now. We have had and we have described a fair amount of noise in our claim department. We have had staffing issues; we have been getting to work the claim -- claim backlogs have been rising.

We are closing in on being fully staffed and we plan to overstaff that claim department to reduce those. We shifted to a new claim system so we could leverage our resources across the organization. That also causes a little bit of data to be [farbled].

My sense is, if all we were getting was seven points a year we might see a little deterioration for a while. It is why we are going for a couple of rate changes at a time. We do firmly believe when we get fully staffed from a claim department perspective, we can actually have favorable loss cost trends from the claim activity we're putting forth. So we believe that will provide a positive earnings volatility or earnings improvement -- all of this will not have to be done with rate.

Got it. Thank you for that.

Yes. The improvement will start to accelerate the back part of this year and into next year. That is when we will be at full staff and overstaffed and start working the pendings down.

Okay. Thank you.

I am not showing any further questions at this time and would like to turn the call back over to Mr. Lacher.

Terrific, thank you operator. Thank you to all of you for engaging today with your ears and with your questions. We continue to work through our actions systematically to drive improvements.

Our life and health segment continues to deliver solid performance, we're seeing tangible progress in our legacy non standard auto and home lines. We're addressing the issues at Alliance United and we know what to do. We know it takes time to see results from our actions and we are optimistic about what we will see there. We're watching the preferred auto lines and catastrophes -- we are high in the first half of the year but that is a normal part of the property and casualty business and something we expect from time to time, so we're not overly concerned with those volumes.

I have said this before but I will say it again, I remind you we are a Company in transition. It will take some time to see all of the improvement levels that we seek but we remain confident in our ability to deliver significantly improved results over the longer term.

We look forward to sharing with you our updated strategy in September and in the meantime you can be assured that we're focused on delivering improved results for the near-term and long-term. Thank you again for your time today and we look forward to talking to you soon.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.