Siriuspoint Ltd (SPNT) 2016 Q2 法說會逐字稿

Greetings, and welcome to the Third Point Reinsurance second-quarter 2016 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to Chris Coleman, Chief Financial Officer for Third Point. Thank you, you may now begin.

Thank you, operator. Welcome to the Third Point Reinsurance Limited earnings call for the second quarter of 2016. Last night we issued an earnings press release and financial supplement which is available on our website, www.thirdpointre.bm. A replay of today's conference call will be available through August 12, 2016, by dialing the phone numbers provided in the earnings press release and through our website following this call. Leading today's call will be John Berger, Chairman and CEO of Third Point Re.

Before we begin, please note that management believes certain statements in this teleconference might constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about expectations, estimates, and assumptions concerning future events and financial performance of the Company and are subject to significant uncertainties and risks that could cause current plans, anticipated actions and the Company's future financial condition and results to differ materially from expectations.

Those uncertainties and risks include those disclosed in the Company's filings with the US Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made and the Company assumes no obligation to update or revise them in light of new information, future events, or otherwise.

In addition, management will refer to certain non-GAAP measures such as diluted book value per share, which management believes allow for a more complete understanding of the Company's financial results. A reconciliation of these measures to the most comparable GAAP measure is presented in the Company's earnings press release.

At this time, I will turn the call over to John Berger. John?

Thanks, Chris. Good morning and thank you for taking the time to join our second-quarter 2016 earnings call. In addition to Chris Coleman, Chief Financial Officer of Third Point Re, with me today are Daniel Loeb, CEO of Third Point LLC, our Investment Manager; and Rob Bredahl, President and Chief Operating Officer of Third Point Re.

On today's call I will provide an overview of our financial results and an update on market conditions. Daniel will discuss the performance of our investment portfolio and Chris will discuss our financial results in more detail. We will then open the call up for your questions.

For the second quarter we reported net income of $53.4 million or $0.51 per diluted share, compared to net income of $15.7 million or $0.15 per diluted share in the prior year's period. Our diluted book value per share increased by 4.1% in the quarter to $12.88.

In the second quarter our investment portfolio performed strongly with a return of 4% which compares to 1.7% in last year's second quarter. The strong performance continued following the end of the quarter with a 2.6% return during the month of July.

After a challenging first quarter our investment portfolio is now up 4.6% for the year through July. Daniel Loeb will discuss our investment returns in greater detail in just a few moments.

The performance of our property and casualty reinsurance segment in the second quarter was disappointing. We produced a combined ratio on 119.2% due to $12.9 million of adverse reserve development on several contracts. We suffered from both industry-wide loss trends and account-specific issues.

Here is a summary. We increased reserves by $4.4 million on a large global commercial auto physical damage and extended warranty treaty that we have written since 2014. We have identified the underlying problem programs and are working closely with the cedent to remediate the issues that are causing the adverse performance.

We took an additional $4.3 million increase on a California workers' compensation treaty that we had written since 2012. This increase relates to the 2012 to 2014 treaty years where additional claim information received in the second quarter led us to take this additional increase.

We suffered a total of $2.7 million of adverse development on two Florida homeowners treaties. The adverse development relates to the assignment of benefit claims problem that exist in Florida and to losses from a hail storm in March 2016. We did not think the AOB issue was fully addressed during renewal of these treaties and therefore we are no longer a participant.

There was $1.9 million of net negative development on our non-standard auto contracts, primarily due to increasing frequency and severity trends. Several of our cedents are struggling to stay ahead of these trends with price increases and measures to combat the negative selection they are suffering from the large national carriers. We have decreased our exposure to this segment and may reduce it further based on market developments.

We reserve to our best estimate by contract and adjust reserves each quarter based on the most up-to-date information available. Our initial loss estimates have proven to be overly optimistic due mostly to our underestimation of worsening market conditions and our clients' inability to promptly react to worsening market conditions.

We remain focused on improvements to our pricing and underwriting processes, remediating problems as they emerge and separating from problem clients and market segments. I will now turn the call over to Daniel to discuss our investment performance.

Thanks, John, and good morning. The Third Point Reinsurance investment portfolio managed by Third Point LLC was up 4% in the second quarter of 2016, net of fees and expenses, versus returns for the S&P and CS event-driven indices of 2.5% and 2.1%, respectively, for the quarter. The count was up 1.9% year to date through June net of fees and expenses. The Third Point Reinsurance account represents approximately 14% of assets managed by Third Point LLC.

Significant market volatility in the first half of 2016 was due primarily to continuing global macroeconomic uncertainty. During the second quarter, we continued to position our portfolio opportunistically to mitigate down-side and remain nimble buyers in challenging markets. We benefited from our decision to reverse positioning mid-way through Q1 by increasing long exposure to several high-yield energy credits and to equity investments in cyclicals, commodities, industrials and emerging markets. These shifts, along with successful navigation of the period following Brexit, contributed to strong performance in Q2.

The Third Point equity portfolio returned 2.6% on average exposure during the second quarter. We posted positive results in almost every sector, with healthcare industrials and commodities leading the portfolio. We generated returns in both our long and short portfolios in several sectors.

Our corporate credit portfolio returned 15.1% on average exposure in Q2, significantly outpacing the Iboxx high-yield index return of 4.8% during the same period. Performance was largely driven by positive returns from performing credit investments in the energy sector. We maintained minimal distressed credit exposure at present.

Structured credit was up 2.6% on average exposure, rebounding after a period of limited liquidity at the onset of the year. Our sovereign credit portfolio continued to add value and our Argentinian government bonds have returned 11.7% for the quarter and 20.4% for the year.

During the second half of 2016 we expect continued periodic market dislocations. We believe we are well positioned to proactively take advantage of such dislocations and invest in compelling risk-adjusted situations across the capital structure. Now, I'd like to turn the call over to Chris to discuss our financial results.

Thank you, Daniel. As John mentioned, we reported net income of $53.4 million or $0.51 per diluted share in the second quarter of 2016, compared to net income of $15.7 million or $0.15 per diluted share in the second quarter of 2015. For the six months ended June 30, 2016, Third Point Re reported net income of $2.2 million or $0.02 per diluted common share, compared with net income of $66.1 million or $0.62 per diluted common share for the six months ended June 30, 2015.

For the three months ended June 30, 2016, diluted book value per share increased by $0.51 per share or 4.1% to $12.88 per share from $12.37 per share as of March 31, 2016. For the six months ended June 30, 2016, diluted book value per share increased by $0.03 per share or 0.2% to $12.88 per share from $12.85 per share as of December 31, 2015.

Gross premiums written increased by $12.7 million or 7% to $196.9 million for the three months ended June 30, 2016, from $184.2 million for the three months ended June 30, 2015. Gross premiums written decreased by $3.6 million to $394 million for the six months ended June 30, 2016, from $397.6 million for the six months ended June 30, 2015.

In the quarter we wrote $18.1 million of new business and non-renewed $38.7 million of premiums, of which $23.6 million was non-renewed due to unacceptable pricing and/or terms. The balance was not subject to renewal. Other movements in gross premiums were due to changes in premium estimates, contract extensions, and other timing differences.

Since we focus on a limited number of large contracts, we are prone to having significant changes in premiums written from one quarter to the next. Rather than looking at quarterly results, annual results are a much better indication of our premium volume trends.

Given the size of our average deal and normal completion timing uncertainties, it is always difficult to project our future writings. But we will likely generate a similar or possibly lower amount of premium for the full year of 2016 versus 2015, as we work to improve our composite ratio in a difficult market environment.

Net premiums earned for the three months ended June 30, 2016 increased by $12.7 million or 11% to $133.1 million. Net premiums earned for the six months ended June 30, 2016 increased by $10.4 million or 4% to $269.9 million. The increases in net premiums earned for both periods were primarily due to a larger in-force underwriting portfolio.

We generated a $25.6 million underwriting loss in the three months ended June 30, 2016, versus an underwriting loss of $9.4 million in the prior-year period and our combined ratio was 119.2% versus 107.8%. For the six months ended June 30, 2016, the underwriting loss was $32.2 million and the combined ratio was 111.9%. For the first six months of 2015, we produced an underwriting loss of $13.2 million and a combined ratio of 105.1%. The increase in the underwriting loss in the most recent three- and six-month periods is primarily due to the $12.9 million of adverse loss development in the second quarter that John just detailed.

For the three months ended June 30, 2016, Third Point Re reported net investment income of $86.3 million compared to net investment income of $38.6 million for the three months ended June 30, 2015. For the six months ended June 30, 2016, investment income was $46.2 million compared to $103.5 million in the six months ended June 30, 2015.

The return on investments managed by the Company's investment manager, Third Point LLC, was 4% for the three months ended June 30, 2016 and 1.9% for the six months ended June 30, 2016. This compares to 1.7% and 4.8% for the three-month and six-month periods ended June 30, 2015, respectively. As Daniel just covered in greater detail, the strong performance in the second quarter outweighed moderate losses in the first quarter and we generated positive returns for the first six months of 2016.

Corporate expenses, or general and administrative expenses not allocated to underwriting activities, were $4.2 million for the second quarter of 2016, compared to $7.8 million for the second quarter of 2015, and $8.4 million for the first two quarters of 2016 compared to $12.7 million for the first two quarters of 2015. The decreases were primarily due to separation costs in the prior year periods and lower stock compensation expense in the current year periods.

Other expense for the second quarter of 2016 was $3.2 million and for the second quarter of 2015 was $2.3 million. For the six month periods ended June 30, 2016 and June 30, 2015, other expense was $5.9 million and $5.0 million, respectively. Other expense represents interest credits paid on deposit in certain reinsurance contracts.

In February 2015, Third Point Re USA issued $115 million of senior notes bearing an interest rate of 7%. As a result, we had $2 million of interest expense for the second quarter of 2016 and $4.1 million for the first two quarters of 2016. In 2015, interest expense was $2.1 million in the second quarter and $3.1 million for the six months ended June 30.

Income tax expense or benefit is primarily driven by the taxable income or loss generated by our US-based subsidiaries as well as withholding taxes and uncertain tax provisions on our investment portfolio. We recorded an income tax expense of $5.3 million for the three months ended June 30, 2016 and $3.4 million for the six months ended June 30, 2016. This compares to $700,000 of income tax expense in the three months ended June 30, 2015, and $2 million for the six months ended June 30, 2015.

Lastly, we repurchased 644,768 common shares in the second quarter at an average cost of $11.46 per share and have $92.6 million available under our existing $100 million authorization. We will continue to be active in the open market when our shares trade persistently below book value, as they did in the second quarter. I'll now hand the call over to John.

Thank you, Chris. Our investment portfolio managed by Third Point LLC produced strong results in the second quarter after a difficult start to the year. In the second quarter our investment portfolio was up 4% and year to date through July we are up 4.6%.

Unfortunately, the other leg of our total return model did not perform as well this quarter. We had a disappointing reinsurance underwriting result due to $12.9 million of adverse reserve movements. As I previously stated, we remain focused on improvements to our pricing and underwriting processes, remediating problems as they emerge and separating from problem clients and market segments.

We thank you for your time and we will now open the call for questions. Operator?

(Operator Instructions)

Kai Pan, Morgan Stanley.

Good morning and thank you. First few questions for Dan. Dan, you mentioned you reported later about Brexit. Just wonder your you view on potential market impact from the US election and could the market be caught flat-footed by that events as well?

Sorry, so the question is -- I don't understand the question. (Multiple speakers) project the outcome of (multiple speakers) election.

The question is really about the potential market impact. Would that be a surprise to the market, basically like what you have observed from Brexit.

I think people are understandably drawing comparisons between Brexit and the US presidential election. Obviously the US presidential election is consequential. But Brexit was a referendum on participation in the EU. This is very different. We're talking about the leaders of the United States.

So I think people want to draw comparisons between the populous backlash that promoted Brexit, which I think you could go through and analyze and discuss and assess what the merits were or not for Brexit. This is very different. We have some very unusual personalities involved in this election. I think they're giving people some concern.

I'm not going to predict the outcome but we're obviously watching the polling very closely and I think that the election is important but I think the polling would suggest that we will be in reasonable shape in this election. I just want to leave it at that. I don't want to get too much into the election discussion.

Sure. Second question on your investment in China, Didi. It's different than before because I think this is the first investment for you in China and also is a private investment. So I just wonder how big is the investment relative to your portfolio? And how do you think about the country risk as well as the liquidity?

We've been investing in private companies since 2000 or even before, so it's not our first. I would just differentiate. Didi is a relatively late-stage private company. This wasn't like a start-up or a series A, this was a fairly late stage.

We look at this as a bridge equity investment to an IPO which we expect to take place next year. Didi's already announced its merger with Uber which will take an enormous amount of risk out of the investment. Irrespective of the country risk in China, this is a tremendous opportunity, as we outlined in the letter, to be at the forefront of a technology in transportation in the biggest market in the world. So we're very excited about it.

I don't know what we -- I'll refer it back to the TP Re folks. I don't know that we disclosed the size of the position. It's appropriate, given that it's private for us.

Dan, we do not disclose the amount of the positions, but we are taking only a small portion of the privates that Third Point invests in right now.

Okay, that's great. And then next one is on -- Dan, you mentioned that you hired new teams and moving away from generalists to a sector specialist. I just wonder, would that impact your operating process as well as culture? For example, would that create silos and create frictions among the teams?

This isn't a new development. We have been creating specialists in asset classes, geographies and industry groups for the last six or seven years. This is nothing new.

The new thing is that we've been adding to the team and have a lot of new talent, particularly in financials, technology, consumer, risk arbitrage and healthcare. So we're just beefing up the team that we already have. But this doesn't represent any kind of a new development.

And as far as the culture goes, everything is consistent with the way we've done things. We're very team-oriented, collaborative, transparent culture. We work together very well and there's no -- we don't -- it may work for other firms. We're not a silo-based firm.

Okay, that's great. And then we saw news of like pension funds and the insurance company pulling out of their asset allocation in hedge funds. I wonder, is that any impact on the Third Point fund?

No. Unfortunately, due to the poor performance of a couple of hedge funds out there, it's caused some institutions to rethink their hedge fund strategy. Some of them have just completely gone out of the market. We had some exposure to those firms, but the ones that we did have exposure to have already -- that's already behind us.

Okay, that's great.

It wasn't a meaningful amount of redemptions.

Okay, that's great. Now moving to the underwriting side, John Rob and Chris. On the reserve charge it's 10 points. What's the potential further down side from this for contracts? And also if you're looking like in hindsight, what you could have done differently in terms of reserving process and how do you change that? How would you change that going forward?

Kai, segment by segment, if you look at the auto physical damage and extended warranty, it's a program that we started writing in 2014. Our total written premium on that for the three years is about $370 million. So we're seeing -- when we wrote the deal we knew there were a couple problem areas that needed addressing and we thought we and the ceding Company, we were taking appropriate actions at inception.

Turns out the actions were not sufficient to head off the problems. The reserve development on that, while it's $4 million, it's on a pretty big base. This is a global deal. We're participating with a really world-class partner on this. So we're optimistic that the fixes are in place, the problems have been addressed. A couple of the areas have turned around. And so we think with this reserve increase we're in pretty good shape. But we're watching it intently.

On the workers' comp, this is the second time around. We've had a reasonably large reserve increase on it. Put that in perspective. That deal we've written since 2012. All in, inception to date, we have about $180 million in premium and the current combined ratio on that is 105%. So higher than we originally thought by about 7%.

And I think there we just -- when we wrote the business we knew California was tough, that it was coming out of a very tough time, but the rate increases were substantial. And we thought our partner was better than most. They are better than most, but not as good as we thought. In our model, workers' comp at a 105% is still attractive. It generates reasonably long duration claims. And again, we think we're on top of that. Now, I've said that before and have been wrong. So I hope I'm right this time.

On the non-standard auto, that's tough business. Just by its nature, it's mostly MGA-driven. From our inception we've written about $400 million of that business. We currently have it reserved at 100% composite ratio which there's not a lot of cash flow on that business. So that's tough. It's still very competitive when we tried to take corrective action through treaty terms and conditions, we find that the market will step up and either improve the deal or renew its expiring.

So that's shrinking. That one is a little bit easier to get our arms around because it's short tail. So again, we think with this increase we're in good shape. That's a segment that is, as we're unable to get the appropriate reinsurance terms and conditions, it's shrinking somewhat dramatically.

And on the Florida business, that's probably the area where we're most confident in that we have it right this time, given it is relatively short tail. The whole market's been caught out on the assignment of benefits. It's an instance too where when we started to see that pop up on our accounts, we tried to take, again, corrective action through the terms and conditions. And, again, the market pretty much went on as expiring and we retired from many accounts. That business is running at about 100% composite which, again, for our model is not ideal because there's not a lot of float on that.

But to put that in perspective, when we wrote the business we thought it was going to run like a 96% or 97%. So it was never going to be a home run. It's not cat-exposed business; it's for the attritional losses. So while this increase is disappointing, when you look at overall the economics of the business and the other segments, for that matter too, economically it's not that bad.

Are you changing any of your processes going forward?

We think we have very robust processes. I think a part of the issue is we -- in retrospect everything is clear. Across the board here we were overly optimistic when we wrote the business. Our initial loss picks proved to be too light, not high enough. And so on business, I think we're taking a much more pragmatic view.

When we started the Company, I stated very strongly that our goal was to get below 100% combined ratio. We believed we could at the time. We thought there was significant margin in these segments that we're writing. As it turns out, I was wrong, that the competitive nature of the market has just really gotten more and more intense over the five years, four-and-a-half years we've been in business. And this business just doesn't carry the margin that we originally thought it did.

Okay, great. Thank you so much for the detail. My last question is if you strip out these reserve charges from both prior quarter and this quarter, is it running around about a 104% composite ratio relative to 100% a year ago? I just wonder, the increase, is that coming from business mix or market condition? Or are you being more conservative picking your initial loss picks?

Pretty much all the above there, Kai. When you see our track record of missing on the loss reserves, you say, wow, we should be reserving any new business at a higher loss ratio. So we have increased our loss picks.

So is that like a reasonable run rate, like 104%, 105% composite ratio going forward?

Yes, it's probably a little high, Kai. If you adjust the six-month composite ratio for the $12.5 million of adverse development, that equates to a 102% composite. And that's probably a little high, given we made some loss reserve adjustments in Q4 that had business that was still to earn into this year. So certainly looking forward, we would hope that 102% would drift down a little bit. So it's probably not quite as high as the 104% that you noted.

Okay, that's great. Thank you so much for all the answers.

Thank you.

Jay Cohen, Bank of America.

Yes, thank you. Looking at the reserve additions, the one bucket that would probably leave you with the most uncertainty still would be the workers' comp, given the tail on that business. Two questions. One is, you said you guys were booking this business at a 105%. Do you know where the industry is for the same time period? So that's question number one. Secondly, given that you were taking charges in several different areas, was there any extra effort this quarter to get this behind you, given that it was going to be an ugly quarter anyway?

The first question, when we first looked at the California workers' comp we really thought there were three main segments. One, you looked at the state fund in the residual market. And their loss ratio is 30 points higher than the specialist. So you had the state fund number.

Then you had the nationwide writers who performed better than the state fund, but still not great. And then you had the specialty writers, the California-only [dizeenus], the republic indemnities that outperformed the state fund by 30-plus points.

The deal we wrote was a California-only. We weighted it more towards the specialty on our original pick, and as it turns out it's performing more like the nationwide. So it's substantially, significantly worse. There's still a good amount of IBNR on it. We're somewhat frustrated by our inability to get it right. We think we have loaded it up this time. But, again, as you said, Jay, long-tail casualty business, historically, in reinsurance is tough to reserve.

And your second question about have we been even more conservative this time, like hey, it's a bad quarter, let's add some extra in there. Without sounding too defensive, yes, now we've delivered adverse development several times and we're saying let's just be more conservative in our picks on existing business and any new business we write.

Got it. Thanks.

(Operator Instructions)

Christopher Campbell, Keefe, Bruyette, Woods.

Yes, good morning.

Good morning.

Okay, another question on the reserves, but it looks like you were taking charges on specific contracts. Are there similar contracts in the underwriting portfolio that might need a similar true-up?

We reserve contract by contract, so at this point we don't think so. The one workers' comp contract is one of a small number, but by far the largest. The auto physical damage extended warranty is the only contract of that type we have. The non-standard auto, we think we're on top of each of the contracts, so we think the ones we've addressed are the appropriate ones. And on the Florida homeowners business, we do claims audits, we believe we're on top of all those and we think the two contracts that we've addressed are the appropriate ones.

We didn't renew any.

And several -- yes, we didn't renew any of the deals. So it's not like we have new exposure that we're still watching.

Okay. So these are really just -- these are specific to these contracts and not indicative of like an underlying trend that you're seeing across multiple contracts?

Correct.

Okay. And then switching to the premium growth, I know it can be lumpy, but you did grow in specialty and then shrunk in property. Is there anything that we can read into that going forward about your underwriting appetite?

The property shrinking, that's really the Florida homeowners where, again, we recognized the AOB problem when most people did say, wow, this is an issue. And we were surprised that companies were able to renew their reinsurance programs without any improvement in terms and conditions. We retired from many accounts, so that explains the property drop.

The other areas we've had some existing contracts extended for six months. We have written some new business. One area that we like are loss reserve deals. We have yet to write one this year. We have some in the pipeline and we're hopeful that we hit on them. But we have not written any of those this year.

Okay. And just one more question on the buybacks. I think when you guys originally did your IPO, I think the repurchase price, it's decided by the Board but it couldn't be any larger than 100% of book. Given you guys are about 98% of book value per share using last night's number, how should we think about this going forward? And what are the criteria then that you use internally to decide on the buyback?

It's I think pretty consistent with what we said last quarter. To the extent that we're trading below book value, it's a very compelling opportunity to repurchase our shares for the obvious accretion to [diluted] book value per share and earnings per share. So we'll continue that strategy.

We were repurchasing shares in the second quarter when our share price was drifting down closer to 90% of book. And we expect that to be our strategy going into the third quarter as well. Obviously, we're managing the amount of share buybacks relative to our capital, considering rating agency considerations and other opportunities in the pipeline as well.

Great. Thanks for all the answers. Best of luck in the third quarter.

Thank you.

Ken Billingsley, Compass Point.

Good morning. I wanted to ask -- I believe you guys have been growing your MI reinsurance business. Is that correct?

Ken, That is correct. We started writing this business really our first year. I think we got in before the current stampede and it's increased steadily. And so the total amount of business we've written and we're currently very close to two more deals and we think we have one that will come in next year. So all in, we've written about $200 million, $225 million of that business.

So my question is, it seems that more and more, and I'll say reinsurers tend to think this is like a holy grail line of business to write in the current competitive market. Can you give me a talk since you've been writing this from year one, really where can this go wrong? What change (technical difficulty) in the product structure, pricing is in the product now given the increased attention it's getting from newer competitors?

I think where it goes wrong, it's really an economic [cad] cover. You look at what happened in 2008. I think you really need some real financial stress in the marketplace.

Why we liked this business four years ago is that the standards to get a mortgage have really been tightened up. So you don't have the fraud, the loose credit guidelines you had in the past. So we think the loss scenarios have really improved. But I think where it really tips is a real economic crisis.

I'm assuming that the margins on that business have shrunk in the last four years, though, as more and more people have identified that as an attractive line.

What's interesting, Ken, they haven't. I think the reason being, the demand is big. I think the numbers we see, so far about $7 billion of limit has been put into the reinsurance market and that's expected to grow over the next reasonable number of years to something like $45 billion.

So that makes you realize how small reinsurance capital is compared to the financial markets. So we've actually seen on renewal of MI reinsurance treaties not a lot of movement on terms and conditions. So it's one of the few areas that's holding up and I think it's really because the demand for it is outstripping the supply.

So obviously I'm thinking of the TMIs themselves. You don't expect them in two years as they start building up their capital, that they're going to look to recover some of those costs? You believe that there's going to continue to be a growth in the reinsurance marketplace for the next few years?

Two years from now I don't know. Clearly, we're dealing with the present and next year. The GSCs are really, that's really the big area of growth and that -- a lot of companies -- that you can write that business as a reinsurer. And those are the numbers that really are increasing the demand.

Ken, there's a surge in demand because the GSCs turn their product into a reinsurance-accounted product. Previously it was a derivative-accounted product. Reinsurers became more interested in that.

On the MIs, the regulators have been very clear on the capital treatment of reinsurance. With those changes which happened at about the same time, there's been this big surge in demand. I think over the next few years terms and conditions will head the wrong way, but I think we have a good runway right now.

To date they've held up.

Great. Thanks for taking my questions.

Thank you, Ken.

Thank you. At this time I'll turn the floor back to Mr. John Berger for closing comments.

Thank you very much for listening and we look forward to talking to you next quarter. Thank you.

Thank you. This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.