ProAssurance Corp (PRA) 2017 Q2 法說會逐字稿

Good day, and welcome to the ProAssurance Corporation Second Quarter 2017 Earnings Conference Call and Webcast. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Frank O'Neil. Please go ahead.

Thank you, Alice, and good morning, everyone. Welcome to our conference call to discuss ProAssurance's results for second quarter 2017.

I like to tell you that the results were reported in the news release issued on August 7, 2017, and in the company's quarterly report on Form 10-Q, which was also filed on August 7. These documents are intended to provide you with important information about the significant risks, uncertainties and other factors that are out of the company's control and could affect ProAssurance's business and alter expected results. Further, we caution you that management expects to make statements on this call dealing with projections, estimates and expectations, and we explicitly identify these as forward-looking statements within the meaning of the U.S. federal securities laws and subject to applicable safe harbor protections.

The content of this call is accurate only on August 8, 2017. And except as required by law or regulation, ProAssurance will not undertake and expressly disclaims any obligation to update or alter information disclosed as part of these forward-looking statements.

The management team at ProAssurance expects to reference non-GAAP items during today's call. The company's recent news release provides a reconciliation of these non-GAAP numbers to their GAAP counterparts.

On our call today are Chairman and CEO, Stan Starnes; Howard Friedman, the President of our Healthcare Professional Liability Group; Chief Financial Officer and Executive Vice President, Ned Rand; and Mike Boguski, the President of Eastern, our workers' compensation subsidiary.

Stan, will you start us off?

Thank you, Frank. I know there is a lot of interest in our comments today, given the pre-announcement results of last Tuesday.

Let me stress again what I said in that pre-announcement. We remain confident in the long-term strategy we set out and we are equally confident in our ability to execute that strategy to continue to produce solid shareholder value. We believe there is nothing in the isolated events that occurred in the quarter that indicate issues with the fundamentals of our business. That said, we recognize that these isolated items contracted from what otherwise would have been a solid quarter. And as our style, we identified them, dealt with them and disclosed the outcome. Now we move forward.

And in that vein, I'd like Howard to spend a few minutes explaining those items, and then we will move on to discuss the operational successes of the quarter, which I want to be sure we do not overlook. Howard?

Thanks, Stan. I'll cover the $5.2 million pre-tax charge in our Specialty P&C segment segregated portfolio cells, which will amount to about $3.4 million after-tax is now as shown in the financials as a segregated cell portfolio dividend expense for this segment. The charge trues up the accounting for the accumulated earnings paid to the entities that own segregated cells within our historical Bermuda captive facility at various times since 2003. These earnings were paid as dividends to the owners and we should have expense the payments as they were made, but that did not happen. We're confident that this is an isolated issue and there will be no further charges related to this.

Few final points on this. Our Bermuda facility was never a large part of our premium base and there is little ongoing activity in that operation. And although the structures are similar, this is in no way connected to our current segregated portfolio cell program operating under the umbrella of Eastern Re in the Cayman Islands.

The second item is the confidential settlement of a lawsuit arising from our handling of a medical liability claim. While we do not see these types of lawsuits frequently, they're not uncommon. The terms and details of the settlement are confidential and we will recover much of the amount of the settlement under a reinsurance treaty. None of that is particularly unusual, but this was an older accident year without a great deal of IBNR remaining.

Due to the loss sensitive terms of that reinsurance treaty, our recovery resulted in approximately $3.2 million of additional ceded premium to reinsurers. That's really the effect here, the reduction in earned premium in the quarter in Specialty P&C. We have already booked that anticipated reinsurance recovery, so the full effect of this settlement is reflected in the quarter's results, which Ned will now address. Ned?

Thanks, Howard. There are a number of positive items, the highlights in the quarter. Starting with gross premiums, which rose almost 6%, driven primarily by quarter-over-quarter growth in our Specialty P&C and Workers' Compensation segments, which were up approximately 8% and 5%, respectively. We believe these gains are especially meaningful given the competitive nature of these 2 lines of insurance and demonstrate our ability to successfully source and compete for new business, as well as retain existing business.

On that note, new business was a strong point in the quarter. We wrote $9.4 million of new business on our Specialty P&C segment and $9.5 million of new business in Workers' Compensation. The consolidated current accident year net loss ratio was 80.2%, down a little more than 1 point from the same quarter last year. The consolidated calendar year net loss ratio for the quarter was 64.1%, which is 3.6 points higher than last year, primarily reflecting a lower level of favorable development as compared to the prior year.

We recognized $20 million (sic) [$29 million] of net favorable development and we'll talk about that in greater detail as we discuss segments. Our net investment result for the quarter was up about 1% over last year to $25.2 million.

Gains in our investment in unconsolidated subsidiaries were up $2.1 million and were offset by the continuing drag of low interest rates and the smaller size of our portfolio due to the special dividend paid in January. We have a tax benefit of approximately $330,000 for the quarter and our tax position for the year is a benefit of approximately $1.6 million.

So, all in all, net income for the quarter was $19.5 million, or $0.36 per diluted share. Operating income for the quarter was $21.4 million, or $0.40 per diluted share. Book value stood at $34.41 per share at quarter end, a gain of approximately 2% since year end. As of July, 31, we held approximately $253 million in unpledged cash and liquid investments outside our insurance subsidiaries and available for use by the holding company.

Frank?

Thanks, Ned. Before we move to Howard, I want to mention it was $29 million of net favorable development. So with that, we'll go to Howard Friedman for more detail on Specialty P&C.

Thanks, Frank. As Ned mentioned, we saw premium growth in the quarter in the Specialty P&C segment, 7.6% in aggregate to $125 million. Our physician line, the largest in the segment, was up 7.7% to $85 million. Much of that increase was due to new business, but also due to the expected increase in the 24-month policies which have a predictable cycle of renewals. Premium for facilities was up approximately 21% to $13.4 million. The increase is primarily due to a timing difference related to a new business was recorded in 2016 plus, to a lesser extent, the amount of new business written in Q2 of this year; both of which were partially offset by the predictable loss of some renewals in this very competitive space.

On that note, many of you will recall that last year's second quarter saw us write the single largest premium in the company's history. We were successful in renewing that account this year. That helped drive the increase in premium in the quarter and would explain the decline in new business in the segment, which was $9.4 million. While that's a solid number, it's down from the $21 million of new business in a year-ago quarter.

Premium retention for physicians was strong in the quarter at 90% compared to 87% a year ago. Year-to-date premium retention is also 90%, up 2 points over last year, both indicative of our ability to service and retain the new business we fight so hard to write. Pricing on renewing physician business, a key benchmark for us, was unchanged in the quarter and is 1% higher year-to-date.

Our current accident year net loss ratio for the quarter was 89.7%, an increase of 1.6 points over last year's second quarter and due almost entirely to the denominator of a loss ratio, a decrease in net earned premium caused by the $3.2 million of additional ceded premium I mentioned at the outset.

Our favorable net loss reserve development in the segment was $26.5 million, coming principally from accident years 2010 through 2014. This is $6.5 million lower than the second quarter of 2016 and is due to the continuing effect of a lower base of premiums and the compression of claims severity over the past 5 or 6 years. Overall loss trends for this segment are unchanged.

Frank?

Thank you, Howard. Now we're going to turn to Mike Boguski for comments about our Workers' Compensation segment. Mike?

Thank you, Frank. The Workers' Compensation segment operating results increased to $3.8 million for the 3 months ended June 30, 2017 compared to $3 million for the same period in the prior year, driven by an increase in net premiums earned, a decrease in the net loss ratio and an increase in the operating results of our segregated portfolio cell business, partially offset by an increase in underwriting expenses.

Gross premiums written increased 5.1% to $59.3 million for the 3 months ended June 30, 2017 compared to $56.5 million for the same period in 2016, including new business writings of $9.5 million during the quarter compared to $6.5 million in 2016. Audit premium was $1 million in the second quarter of 2017 compared to $1.6 million in 2016. Renewal pricing decreased 3% in the quarter, reflecting continued price competition in the Workers' Compensation marketplace.

Premium retention was 88% for the second quarter, driven by strong renewal retention results across all product lines including alternative market program business. Premium retention for alternative markets was 91% in the second quarter of 2017 compared to 83% for the same period in 2016. We were successful in renewing all 5 of the available alternative market programs in the quarter. The decrease in the second quarter 2017 accident year loss ratio reflects lower winter weather claims activity in 2017 compared to 2016 and overall favorable trends in claim closing results.

Through June 30 of 2017, we successfully closed 36.9% of 2016 and prior claims, one of the best claim closing results in recent history. Favorable reserve development was $2.9 million in the quarter compared to $1 million in the second quarter of 2016, primarily related to alternative markets business but also includes approximately $4,000 in both periods related to the amortization of purchase accounting fair value adjustments.

The expense ratio for the quarter primarily reflects an increase in underwriting expenses, partially offset by prudent expense management strategies and a 1.1 point reduction in intangible asset amortization. The quarter's combined ratio of 89% includes 1.3 percentage points of intangible asset amortization and 0.8 percentage points of a corporate management fee.

Finally, I'd like to comment on 2 important strategic initiatives. In Q1, we launched Eastern Specialty Risk to provide an additional product and service strategy to our valued agency partners that focus on higher hazard industry employers. I am pleased to report that this specialty underwriting unit has generated direct written premium of $2.3 million, with favorable loss trends through June 30, 2017.

On June 8, 2017, we announced the purchase of the renewal rights to Maine-based Great Falls Insurance Company's book of workers' compensation business. We currently have a regulatory hearing scheduled for the proposed transaction in late August and are hopeful that we can close shortly thereafter. The Great Falls book of business its value of the agency partners and dedicated employee base will serve as the foundation for Eastern's fifth operating region, the New England Region. This transaction will expand the workers' compensation operations into Maine and New Hampshire and ultimately other New England states.

Frank?

Thanks, Mike. Now we're going to go back to Howard for an update on the Lloyd's segment, which, I will remind you, reflects our 58% participation in Syndicate 1729, in which we report on a one-quarter lag. Howard?

Thanks again, Frank. Gross premiums written were down $1.7 million quarter-over-quarter. But we want to stress that there was growth in the non-ProAssurance business and that the decline is due to the decision to reduce the premium ceded by our Podiatry line of business.

You may recall that we began ceding premium from our Podiatry line to Syndicate 1729 during its start-up phase as a way of meeting Lloyd's requirements for bringing new business to Lloyd's and as a method of providing a stable premium base to the Syndicate. In the first 6 months of 2016, for example, we ceded what netted to $13.8 million, given our 58% participation. As the Syndicate has expanded and grown a larger and broader premium base, we were able to reduce the amount of Podiatry premium ceded. Through 6 months this year, we ceded what nets out to $6 million. So that $7.8 million change masks real growth in non-ProAssurance business within Syndicate 1729. All of that washes out in our consolidated results due to an offsetting effect in our Specialty P&C segment, but it does color the gross premium line in the Lloyd's segment and I wanted to be sure everyone understood the process and the outcome.

Net premiums earned were $14.5 million, a 7.3% increase over the same quarter last year. As we've explained in prior quarters, premium and exposure for some of Syndicate 1729's insurance policies and reinsurance contracts are initially estimated when coverage is written and subsequently recorded over an extended period, at which time, the premium, exposure and corresponding loss estimates are revised accordingly.

In addition, some contracts are retrospectively rated with premium adjustments based on loss experience. Those adjustments also factored into the 12-point quarter-over-quarter decrease in the current accident year loss ratio, which was 71.4% in the second quarter. The decrease was also driven, to a lesser degree, by small shifts in the mix of business and the use of loss assumptions that continue to be derived from Lloyd's historical data for similar risks although the Syndicate is increasingly relying on its actual experience to modify the Lloyd's data. The 11.4-point increase in the calendar year net loss ratio is a direct result of approximately $400,000 of unfavorable development in this quarter as compared to approximately $2.8 million of favorable development recorded in the quarter a year ago. However, I want to note that the comparison of the Syndicate's loss reserve development should be considered in conjunction with the changes we made in the third quarter of last year.

To refresh your memory, that's when we modified our method of recording changes in loss estimates, resulting from premium or exposure changes. These changes in loss estimates are now recorded in the accident year, in which the premium change is recognized, typically the current accident year. That third quarter change essentially offset the $2.8 million of net favorable prior year development recognized in the second quarter of 2016. So we're really comparing the $400,000 of adverse development this quarter to 0 last year. When we get to the fourth quarter, we will be comparing apples to apples again.

As the Syndicate continues to grow, we're seeing the expected increase in expenses, although the rate of expense growth is slowing, up $1.6 million this quarter. In addition to the Syndicate's growth, the timing of certain fees payable to Lloyd's itself is quite a roll.

Moving away from the financial results and looking to the future, we note that Lloyd's has improved their creation of a special purpose arrangement, an SPA, within Syndicate 1729. Think of it as a Syndicate within the Syndicate. The SPA will begin writing business as of January 1 with a planned premium of approximately $22 million and will focus on a portfolio of contingency and specialty property business to leverage the expertise of 4 new underwriters. The Syndicate will retain approximately 40% of the business written and will cede the remaining 60% to the SPA.

Frank?

Thanks, Howard. Stan, some final thoughts from you, please.

Thanks, Brian. I am pleased that when we look at the fundamentals of the enterprise, we see continuing validation of our long-term strategy as well as its successful execution. We have every reason to remain confident in a very bright future.

Questions, Frank?

Thanks, Stan. Allison, we're ready for questions, please.

Okay. (Operator Instructions) Our first question today will come from Mark Hughes of SunTrust.

Ned, how much holding company cash did you say you have?

$253 million.

$253 million. In the Specialty P&C business, when you take into account the kind of the timing, the 24-month issues, do you feel like you're getting growth in the business? Is there underlying momentum in terms of new business and growth prospects here?

Mark, it's Howard. Yes, I do feel that. On a quarter-to-quarter basis, it's up and down. And as I noted, last year's second quarter we had a very large new business policy, but even looking at this year, we have generated considerable amount of new premium in all of the different areas of Specialty P&C and I think there is momentum. The marketplace is what it is and we deal with that every day. But on the whole, we're adapting in our healthcare professional liability business adapting to the changes in healthcare, looking at more and more larger account physician business and facilities business and continuing to generate the visibility in that marketplace with our agents and brokers. Looking at June 30, in healthcare itself, we had about $18 million year-to-date and about half of that came in the second quarter.

You had, I think in the Q, discussed 9% rate increase perhaps on the facilities business and I think that was a function of some loss history. Could you talk about that? Is that shown up in the P&L in terms of loss ratio?

I think -- I mean, it certainly blended into the loss experience mostly in terms of those loss activity that generated rate increases is primarily in the prior year or, say, prior several years of experience for some of the facility business. So it probably does not -- it gets lost in the total, I mean if you look at it that way. But on specific accounts and particularly on the larger facility accounts, we rate them based on the experience and we had a couple of them that did not have great results and we increased the premiums commensurately and those accounts renewed with us have the higher premiums.

Very good. At Lloyd's, could you talk about the profit outlook geared -- when you're thinking about the expense ratio relative to the lower amount of earned premiums and understanding there's some shift there that there is not as much Podiatry premiums being ceded, but what's the outlook in terms of profitability now at Lloyd's?

Our view on that is unchanged in 2 ways. First is, we look at it as a long-term development process. We know that expenses will continue -- they're moderating but as you saw they continue to increase because the Syndicate is still growing, it's growing in terms of the premium that is writing and therefore the acquisition costs or the phase, it's also grown a bit in terms of internal staffing and its own development. But we believe and continue to believe, as we have for the past 3.5 years, that this will be and is a profitable operation; and over a period of time, that expense loss premium equation will result in profitability to the Syndicate and to our share.

And Howard, you might also touch on the first year of account that just recently closed.

Yes. The Lloyd's accounting process, for the Lloyd's side of it at least, is the 3 -- at the end of 3 years, you close out the given underwriting year and so the 2014 underwriting year closed with a small profit, which I think is a very good sign for any new syndicate, particularly given the start-up expenses involved in the first year of operation.

And then, your retention on the Specialty P&C business seems like it was strong this quarter, like up 3 points year-over-year, 2 points year-to-date. Is that also an indication that the competitive environment is a little more favorable?

I don't want to deny that. I think we're seeing -- we continue to see competition. I think I would say we're probably seeing a little less competition on the price side, particularly on some of the physician business, and I think that is reflective in the results we've seen both in retention and rate change. At the same time, facilities and large account physician business is still quite competitive. There's a strong desire on the part of many competitors to write the very large premium accounts. So I think it's still kind of a mixed bag out there. I think we are seeing some favorable signs but by no means saying that things have changed overall in the competitive marketplace.

Our next question will come from Arash Soleimani with KBW.

So just couple questions. I think last year, in the beginning of the year you had mentioned pursuing some international healthcare opportunities in the Specialty P&C segment on a direct basis or through reinsurance. I just wonder if you have any updates on those initiatives?

Sure. I'll give you a couple of things. In the Lloyd's Syndicate, the international healthcare team joined a little over a year ago now and has written a book of business at similar to some of the business that they have been historically involved with. I don't have numbers right off hand, but I believe that we are targeting something on the order of $10 million of premium on an annualized basis and I think those -- the results have been similar to that in terms of what they've been able to write. Within our own space, we have looked at a number of international opportunities and continue to look at them. We're doing a little bit of reinsurance of international healthcare business and we also have been involved for several years again on a reinsurance basis in a program ensuring physicians in England -- in the United Kingdom. It's not dramatic but it is something that we expect to grow over a period of time.

And my other question is, I know in terms of that settlement expense you mentioned this quarter that there would be about $3.2 million of higher ceded premiums. Was the entirety of that $3.2 million recognized this quarter in ceded premiums? Or would that be spread across a couple of quarters?

No, it's recognized entirely in this quarter.

Okay. And then when looking at the sort of accident year loss ratio within Specialty, when you back out that $3.2 million from ceded, it seems that the accident year loss ratio actually may have gotten a bit better, and I know 1 quarter doesn't make a trend per se, but I'm just trying to get a sense of how you're thinking about that, because I think you said before frequency is about flat, severity is up maybe about 2%, pricing is about 1%. So what is it that would -- I guess that would imply that the core should kind of creep up a bit, but it seems like it's actually improved. So just wanted to kind of get your thoughts around that.

I'd say it's really mix of business more than anything else. We have not changed our view on the current accident year and the way that we are booking it, but we do book it broken down into many different components. And as those components move from quarter-to-quarter, even in the absence of any change in view, you can get a point or so movement one way or the other.

(Operator Instructions) And our next question will come from Matt Carletti with JMP.

Just a few questions. I guess, the first one's probably for either Stan or Howard. I just wonder if you can give us an update on the Risk Solutions business. I know that's definitely a lumpy business over time, but more so just kind of discussions, pipeline kind of traction from a qualitative standpoint, how that's going?

Matt, I'll let Howard give you the specifics of it, but we've been very pleased with Risk Solutions. It gives us a vehicle for identifying and underwriting risk that we previously did not have and we think it will be a particularly important vehicle for that purpose as we go forward with healthcare, with all of the changes that are coming to healthcare, and to the enterprises that deliver healthcare. So from a strategic standpoint, it's a very important piece of the puzzle. And you're right, necessity is always going to be quite lumpy but let me let Howard speak to the specifics.

Sure. I think that covers a lot of it. Specifically, most of the activity, the things that they've been looking at lately have involved hospitals, loss-portfolio type transactions or due to the continued M&A activity in the hospital space, one hospital acquiring the other and trying to shut down a self-insured trust fund or a captive. So those submissions or potential opportunities are underway. We quoted a few, didn't get them, similar in nature to the transaction that was done in the fourth quarter of 2016 that just have not closed on any so far this year.

Okay. Great. And then maybe one for Mike, on the workers' comp business. We've heard from a peer too this quarter that, particular in the larger account portion of their books and these are kind of smaller account focused companies, so large is kind of relative term, that they were seeing increased competition from kind of larger companies, so the idea being that possibly maybe because what's going on a commercial auto or elsewhere that there was a search for more profitable lines of business. Are you seeing anything along those lines? I mean, the headline growth number wouldn't suggest so, but I was hoping you could go behind the scenes a little bit.

Sure. Matt, just kind of looking at the overall competitive profile, we have in the last really 3 years seen more competition from what I would call the regional and national stock carriers. As the industry combined ratio in workers' comps come under 100, I think they view that line of business as a growth target. So I'd agree with that assessment. We're also looking at the high technology workers' comp specialty markets coming up into the middle market space and continued increased competition from what I would call regional workers' comp special. So those are kind of the 3 areas of competition that's been really consistent over the last kind of 3 years.

Okay, great. And then just one last question for Ned. Just want to ask the -- kind of the quarterly capital question. You're halfway through the year, there's been some good growth, but I think at the same time, you mentioned in the past about always needing to kind of look at capital to help hit target ROEs and things of that sort. So I guess the question is, how do you -- as you sit here halfway through the year, how do you think about that? And to the extent that there is room for management, is there certain mechanisms or timing that we should think about?

Matt, I don't think our thinking has really changed much. So we continue to seek opportunities, deploy capital into the business, and then in returning capital, preferred share buybacks over special dividends. So I don't think anything has changed in that. The evaluation that we do is continual and we will continue to look at that internally and discuss with our board and make decisions when the group thinks it’s appropriate.

Okay, great. Congrats on a -- I know there's a little noise in the headline, but a nice quarter underneath.

And our next question will come from Bob Farnam with Boenning and Scattergood.

I had a question on the Lloyd's segment. Understanding the expense ratios can be coming down but do you have an idea, ballpark, how much premium you need in that segment to be -- to normalize your expenses, the expense ratio? Or how much you planned on when you originally came up with the idea of getting Lloyd's Syndicate?

I think it's safe to say that the premium production has been below what the initial plans were. I don't have a specific number with me right now to say what it is. But we submit a plan, the Syndicate does to Lloyd's every year, and every year we've come in below that plan given the underwriting discipline that's being deployed at the Syndicate. We think it's far more important to stay committed to that underwriting discipline than to try and grow too rapidly into the employee and expense base of the organization. Our initial hope has been that we did a breakeven point some years -- between years 2 and 3, but the growth of premiums has not quite gotten as anticipated.

Okay. So is the loss ratio portion of it kind of coming in as expected? Or is it more an expense issue that's keeping you with the underwriting losses?

Losses, it's a little still early to tell because there is a good-sized casualty book within this segment -- within the Syndicate and so a lot of it will depend ultimately on some of those losses developed. We have had a few areas within the Syndicate where the loss performance has been below our expectations, and that certainly has had an impact on the result. So I think it's probably a little bit of both. The other challenge with being slightly smaller than we anticipated is when those loss events do recur that they have an outsized effect because the premium base is smaller.

Our next question is a follow up from Mark Hughes of SunTrust.

Mike, with the rate down 3%, are you keeping ahead of loss cost trends there?

Mark, the way we kind of looked at it is, over the last 5 years, our compounded renewal rates on the book of business has been up about 13.7%. We gave back 1 point in 2016 and 3 points this year. And I think the other thing to keep in mind is that our claims frequency on an exposure basis has -- over the past 5 years, on average, has been down about 7.8%. So that's kept us ahead of the curve on that front. So -- and again at the end of the day, we will walk away from unprofitable business and we'll continue to be an individual account underwriter and look for adequate rate for exposure.

How was the momentum? You talked about $2.3 million Eastern Specialty Risk. Is that pace building?

It's been -- I described the submission activity and the quality has been really, really solid. I mean, we have written some high quality business in the first 2 quarters of the year, but we've written 11 accounts that represent the $2.3 million and 10 of those have been with long-term Mid-Atlantic agency partners that have been closed in. And so we're really pleased with the start to that unit, keeping in mind we did not start that until late first quarter of 2017. So I mean we've been really pleased with -- and again we're going to look at this on an individual account basis, but this seems to be the appropriate level of growth that we're looking for quarter- after-quarter.

And then Howard, you had spoken about some new opportunity at Lloyd's. You brought in a team of underwriters (inaudible) underwriters should drive 2017. And I think you used a figure of $22 million. Is that the potential impact at -- in your Lloyd's Syndicate segment? Or is that your participation would mean a lower number and should that show up, say, over the next 12 months?

Well, firstly, it would be in 2018. We're talking about starting to write business and I mentioned the $22 million of the plan for 2018. And the Syndicate portion of that would be 40% and 60% to the SPA. So depending on the capital structure of the SPA, clearly the 58% of the 40% of the $22 million would be within ProAssurance; and then depending on whether there is any participation on the SPA separately, that could increase our premium volume.

Okay. So 58% of 40% of the $22 million, is that fair?

I think, yes. And just to be clear, we have an opportunity to separately provide capital to the SPA. If we choose to do so, then we would take up an additional portion of that 60% that the SPA retains. So the SPA will have a separate capital base, a separate group of members that will provide capital to it. And if we choose to provide capital to it, we would pick up a portion of that as well.

So when do you make that decision?

Between now and the end of the year.

Ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Frank O'Neil for any closing remarks.

Thank you, Alice. And no closing remarks here. We will speak to you all again in November when we report quarter 3 results. Thank you.

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