Q2 2020 Sun Life Financial Inc Earnings Call
Good morning, Ladies and gentlemen, my name is the Keytruda and I'll be your conference operator today at this time I will like to come every one to the Sun life Financial Q2, 2020 financial results Conference call. All lines have been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question answer session. The host of the call, Italy Chalmers Senior Vice President head of Investor Relations and capital Management. Please go ahead and his chalmers.
Thank you the Keytruda and good morning, everyone welcome to Sun Life Financial earnings Conference call for the second quarter of Twentytwenty.
Our earnings release and the slides for today's call are available on the Investor Relations section of our web site at Sun life financial Dotcom.
We will begin today's presentation with an overview of our second quarter results by Dean Connor, President and Chief Executive Officer of Sun Life financial.
Following these remarks, Kevin strain executive Vice President and Chief Financial Officer will present, the financial results for the quarter.
After the prepared remarks, we will move to the question and answer portion of the call.
Other members of management will also be available to answer your questions on today's call.
Turning to slide two.
I draw your attention to the cautionary language regarding the use of forward looking statements and non IRS financial measures, which form part of today's remarks as noted in the slides forward looking statements may be rendered inaccurate by subsequent events.
And with that I'll, now turn things over to Dean.
Thanks, Lee and good morning, everyone.
As communities around the world continue to grapple with the health and economic impacts of Cobot 19, our thoughts go out to the many people whose lives continue to be affected.
In the midst of that Sun life is continuing to help our clients employees advisers and communities navigate their way through these times and that sense of shared purpose is stronger than ever.
This quarter. We've also had many important conversations across Sun life about underrepresented communities, including blacks indigenous and people of color. We know that building diverse teams, creating an inclusive environment free of racial discrimination and providing a sense of belonging are all keys to our success.
And we have committed to an action plan. It will take time, but I have high confidence in the ability of people at Sun life to make this happen.
Turning to slide four during this past quarter, we continued on our relentless journey of putting clients at the center everything we do in Asia. We further advanced our digital capabilities rolling out new virtual sales experiences in Hong Kong, Indonesia, India, and the Philippines clients don't have to leave there.
Homes in order to connect with their Sun life advisor instead, they can transact safely from application submission to digital siding without using paper or meeting face to face.
At this year's Asia trusted life agents and Advisors Awards I'm really pleased to report that we won three awards all one by our team in Hong Kong, including insurance company of the year.
During the quarter, we received an insurance license from the monetary authority of Singapore, which will enable us to provide life insurance solutions to help high net worth clients grow protect and transfer their wealth to the next generation. This now expands our presence to eight markets in Asia that we expect debris begin our Singapore operations.
Early next year.
In the second quarter, 85% of individual life insurance applications in Canada, where process without the need for lab tests supported by the introduction of accelerated underwriting last fall and special accommodations for Cobot 19, We also launched the Sun E App, which helps clients and their third party advise.
There is through the process of applying for life and critical illness insurance digitally a faster process with clients receiving a decision in as little as 24 hours.
In Q1, using our Luminato health platform, we rolled out virtual health care from dialogue, Canada's leading tele medicine provider it to sunlight group plan members across Canada.
And then last week, we announced a strategic partnership and 33 million dollar equity investment in dialogue. It's one more example of innovation in a rapidly changing healthcare landscape that supports our purpose of helping clients live healthier lives.
Our group retirement services business in Canada invest over $100 billion of assets in retirement savings for 1.4 million Canadians who are members of the workplace pensioner savings plan.
And in the quarter, we launched a new SG framework that helps those clients identify the investment firms that are SG leaders in every major asset category offered on our platform. We know that a strong focus on MSG by investment managers, often means superior invested performance.
In the US we made it easier to work with us virtually by temporarily waving the platform fee for employers on our advanced Maxwell health digital benefits platform.
In addition, we launched several new capabilities, including enhanced mobile enrollment text messaging and live chat features and additional integration for employee payroll deductions. We also added other virtual options to enroll members for sunlight benefits, including one on one or group enrollment meetings to help ensure they can easily too.
Use their benefits at anytime on any device.
These investments in digital are making a difference in winning new business as technology becomes a bigger decision driver for employers and their brokers and advisors.
Also in the US our new disability administration system Sunworks is hitting its stride with 3500 clients now on the platform with really positive client feedback.
Turning to slide five reported net income of 519 million was down 13% from the second quarter of 2019, reflecting lower interest rates in credit spreads with a partial offset from equity market gains in the second quarter.
While the economic impact of Cobot 19 in credit increased credit charges, and we had a higher effective tax rate on underlying earnings in the quarter underlying net income remained level with prior year at 739 million in part, reflecting good underlying business growth as evidenced by the 11% growth than expected prop.
Fit.
We generated an underlying return of equity of 13.4% for the quarter.
The light cat ratio at SLF increased to 146% a strong level, that's well in excess of the supervisory minimum at Sun life assurance, our light cat ratio ended the quarter at 126% a decrease from the prior quarter, which was primarily driven by a scenario switch in the light cat calculation and as such.
Subsequent change in market sensitivities for credit spreads and Kevin will expand on this when he takes us through the results in a minute.
Our strong capital and cash position remained healthy and along with a low leverage ratio of 23.2%. It provides both flexibility or an opportunity for capital deployment.
Credit downgrades in impairments amounted to a $58 million charge to earnings for the quarter, our high quality well diversified investment portfolio includes a variety of investment types spread across a broad range of sectors and geographies and we've been actively repositioning the portfolio over the past several years in preparation for an x.
Comic downturn.
Insurance sales were down 6% from the prior year, reflecting lockdowns due to the pandemic, but better than the minus 20%. We mentioned on the Q1 call as what we had been seeing in April.
Wealth and asset management sales grew 53% over prior year, a very strong result, fueled by MFS and SLC management.
We were particularly pleased to see MFS net inflows of Usfive point 4 billion, including positive flows from us retail products for the six consecutive quarter.
VNB, which covers our insurance and wealth businesses X asset management was down 12% on lower sales volumes offset partly by better mix.
We also completed the acquisition of a majority stake in infrared capital partners on July Onest as a leader in global infrastructure investing including renewable energy infra Red will broaden SLC management suite of alternative investment solutions, while also creating the opportunity for infrared to access North American invest.
Stirs through our distribution networks. This brings SLC managements assets under management at June Thirtyth, two over $100 billion on a pro forma basis.
Cobot 19 has created much economic uncertainty, but we remain confident in our business specs, our financial strength and our ability to execute well through these complex times, our digital investments have served us well in the early stages of the pandemic, making it easy for clients and advisors to virtually access.
Advice and solutions over the coming quarters, we will accelerate our digital investments to drive even greater ease of doing business for clients and to build on our business momentum.
And with that I'll now turn the call over to Kevin strain, who will take us through the results.
Thanks, Dean and good morning, everyone turning to slide seven our reported net income for the quarter was $519 million down 13% when compared to the same period a year ago.
The drop in reported income was primarily from unfavorable market related impacts, resulting from Kobin 19, specifically lower interest rates narrowing credit spreads and changes in the fair value of investment properties, partially offset by equity market impacts as markets rebounded from the lows we saw in the first quarter.
Positive equity market impacts also included basis risk primarily on our Canadian segregated funds, which was negative this quarter and the impact of lower valuations on private equities.
Underlying net income of $739 million and earnings per share of $1.26 remained level with Q2 2019, our underlying results this quarter versus prior year were driven by strong growth and expected profit investing activity gains favorable morbidity experience and higher net investment returns on surplus offset.
Unfavorable tax impacts on adjustments relating to the prior years Canadian tax filings of approximately $50 million and lower tax exempt investment income unfavorable credit experience of $58 million in the quarter, primarily driven by downgrades and unfavorable expense experience from from lower expense recoveries in our Canadian group benefits administered.
Patients business.
Our underlying return on equity for the quarter was 13.4% within our medium term objective of 12% to 14%.
Assets under management grew by nearly $100 billion in the quarter to over $1.1 billion driven by the strong recovery in equity markets and the overall net inflows, partially offset by foreign exchange impacts.
Book value per share of $37.56 increased by 4% over the prior year, reflecting reported net income and foreign exchange gains in other comprehensive income over the last 12 months.
Our capital position remains strong at 146% like Kevin at SLF, and 126% like at ADESA Lake are strong capital position gives us flexibility for investments in organic and M&A growth as well as protecting us against economic volatility.
Reduction in the escalate light cat ratio from the prior quarter reflects the impact of a scenario switch in the like had calculation.
As we switch scenarios in Q2, we saw approximately a one percentage point reduction from the shifting coming through this quarter with a further three percentage points that come through over the next five quarters, assuming we remain on the new scenario.
In addition, under the new interest scenario narrowing of credit spreads now result in a lower like hit ratio and this amounted to a two percentage point reduction in the escalate like that ratio in the quarter.
Slide cat ratio experienced similar impacts, but increased quarter over quarter to a 146% due to the $1 billion subordinated debt offering in may which added five percentage points to the aslef like hit ratio.
Our cash at SLF remains strong at $3.5 billion and our financial leverage at 23.2% remains below our target of 25% at the end of Q2, both reflecting the $1 billion debt offering in may.
Since quarter end, we completed the acquisition of infra red, which reduced our cash position by approximately $510 million and our SLF like out ratio by 2.5% subject to regulatory approval. We also anticipate redeeming $500 million of subordinated debt callable in September which will further reduce our cash balance.
And our Essilor fly cat ratio by a further 2.5% and reduce our financial leverage ratio by 1.3%.
Pro forma these two transactions the SLF like hit ratio would be a 141% and leverage would be 21.9% seasonally light cat ratio will not be affected as these transactions are funded solely from SLF.
No buybacks were completed during the quarter following AOS fees request in March that all federally regulated financial institutions in Canada, halts share buybacks and dividends increases.
As a result or normal course issuer bid will expire in August 13th and we will wait until August fees hold is lifted before revisiting our share buyback program.
Slide eight shows business group performance on a reported and underlying net income basis in Canada reported net income was down 21% driven by unfavorable mark related impacts, primarily reflecting lower interest rates and corporate spreads partially offset by equity market growth on an underlying basis, Canada delivered underlying net income.
That was 16% higher than the same period in 2019, driven by higher investing activity and strong growth in expected profit, partially offset by credit experience and unfavorable results in group benefits. The unfavorable results in group benefits reflected continued long term disability experience as a result of rising mental health claims.
And lower transaction fees in our group administration services business from lower dental and extended healthcare claims. This was partially offset by the favorable impact of lower dental and pair medical claims in our fully insured block of business.
Reported net income in the U.S increased by 23% in us dollars against the same period last year, reflecting improved market related impacts and lower integration costs. Following the completion of the integration relating to the Assurant acquisition at the end of last year.
US underlying net income increased by 11% in us dollars driven by business growth again from the conclusion of a legal matter and a favorable morbidity experience in group benefits, partially offset by unfavorable mortality in credit experience in our asset management businesses. We saw reported earnings that were slightly lower than the prior year driven by.
Unfavorable fair value adjustments on MFS share based payment awards and costs related to accretion of the put liability on the acquisition of Bentall Green Oak on an underlying basis asset management earnings driven or increased by 6% driven by an increase in performance fees ESL fee and the contribution from biggio partially.
Offset by higher sales expenses in them effect.
Asia is reported net income was $8 million lower year over year, primarily due to the impact of narrowing credit spreads in the quarter underlying net income for Asia decreased by $3 million due to unfavorable credit experience and lower FX gains largely offset by a gain from a mortgage investment prepayment and favorable more.
Good to experience.
Our corporate segment, which includes the UK runoff business was down $62 million in underlying net income compared to Q2 2019. The decline was primarily due to an unfavorable adjustment relating to the prior years Canadian tax filings and lower tax exempt investment income in Canada, partially offset by higher net investment returns on surplus.
$23 million predominantly from seed investment gains, where we recovered our losses from the prior quarter related to credit spreads.
In the UK, we had unfavorable credit experience offset by higher investing activity and favorable mortality experience in the annuity business.
Slide nine provides an overview of our sources of earnings despite the challenging environment expected profit increased 11% compared to Q2 2019, driven by widespread growth.
Asia grew modestly Canada grew 12% the us grew 23% and our asset management businesses grew 10% driven by ESL fee management acquisition of Benfold Greenfield.
New business strain of negative $5 million in the quarter was in line with the same period, a year ago and was mostly impacted by lower sales as a result of cobot 19, offset by strong sales in international hubs in Asia, and repricing of individual insurance products in Canada experienced losses of $403 million pre tax.
We're largely driven by unfavorable market related impacts of $432 million pretax primarily relating to the impact of falling interest rates in particular at the longer entered the yield curve in Canada. The narrowing of credit spreads impacts of appraised values for investment properties, partially offset by the rise in echo.
Any markets during Q2.
Other experienced items, which we have called other notable items impacted both reported and underlying earnings and were $29 billion pre tax as strong investing activity results offset credit experience.
Credit experience was negative $72 million pre tax, reflecting the impact of downgrades and impairments in our fixed income portfolio. In addition to our quarterly loan review process, we increased our focus on areas, where we saw potential for higher yield higher levels of rating migrations, given the impact of the pandemic and the current economic environment.
This included those sectors that we highlighted in our Mdna this quarter.
We had small impact from assumption changes in management actions during the quarter of $3 million.
Other of negative $52 million in our source of earnings includes acquisition and integration costs relating to acquisitions in SLC management and fair value adjustments on share based payment awards at MFS.
Earnings on surplus increased year over year, primarily driven by gains on seed investments as a result of narrowing credit spreads and higher MFS gains offset by market losses on real estate investments our effective tax rate on a reported basis was 8.6%, reflecting tax exempt investment income within market related impacts.
Which was partially offset by an unfavorable adjustment relating to the prior years cutting tax filings.
The latter adjustment also impacted our effective tax rate on an underlying basis, which was 26.1% above our expected range of 15% to 20%.
Slide 10 shows sales results by business group for the quarter, while Cobot 19 had an impact across many of our businesses. We saw resilience in a number of channels as we pivoted to digital tools and solutions to meet client needs.
In the US insurance sales in the second quarter 2020 were in line with the same period in 2019 on a constant currency basis, reflecting strong performance across all businesses in a challenging environment in Asia insurance sales were also in line year over year on a constant currency basis. Despite many of the countries in which we operate remaining unlocked.
And on for most of the quarter.
We had strong performance in our high net worth businesses in international hubs as well as higher sales in China in Vietnam. This was mostly offset by lower sales in those markets have experienced more severe lockdowns like the Philippines, Malaysia, Indonesia and India.
In Canada fewer group clients coming to market, along with lower individual insurance sales primarily in the third party high net worth channel reduced sales by 22% year over year.
Well sales increased by $19.7 billion or 53% over the prior year, while Candace sales decreased by 20% due to lower sales in group retirement services and individual well this was more than offset by a 36% increase in Asia, while sales and a 56% increase in asset management sales both on a constant currency.
Basis Asian wealth sales were driven by fixed income sales in India and money market sales in the Philippines, while asset management sales were driven by higher mutual fund and managed fund sales in MFS and higher sales and ESL fee management.
MFS saw positive flows of Usfive point $4 billion this quarter driven by retail, making Q2, the six successful quarter of positive retail flows institutional flows were slightly negative driven by client rebalancing.
Five new business was $206 million in Q2, a decrease of 12% year over year, largely driven by lower sales in Canada and Asia due to the impact of Cobot 19, partially offset by favorable product mix in Canada individual insurance and international hubs.
Moving to slide 11 operating expenses for the first half of the year increased 3% on a constant currency basis over the same period last year controllable expenses are up a modest 2%, reflecting savings from lower discretionary spend like travel and conference food costs due to covert 19, partially offset by continued investment in digital initiatives.
Across the company.
As we continue to work through the impact of Cobot 19, we want to give you a view into what July it looks like for sales claims and other items impacted by the pandemic.
In the month of July sales across our products and businesses were mixed with total individual insurance sales at approximately 95% of the levels in July of 2019 and wealth sales at 110% of July 2019 levels for group benefits. So July premium volumes and business in force were.
Relatively unchanged from the end of the second quarter in July our mortality and morbidity claims experience from Cobot 19 has been small amount into less than 5% of our monthly average for mortality and disability claims paid.
With Canada, and the us gradually reopening businesses and services health and dental benefits claims have increased compared to the monthly average or the second quarter. However, we're still below historical levels.
For our borrowers and real estate tenants, we have granted interest principal and rent payment deferrals on a case by case basis with the majority of the deferrals being up to three months during the second quarter, we collected nine 9% of our expected investment related cash inflows.
Outstanding deferrals as at the end of July were just less than $40 million with additional requests currently under assessment to conclude cobot 19 in associated economic conditions continue to present challenges, but we remain well positioned with strong capital and liquidity supported by a low financial leverage ratio strong like at rate.
As shows an excess castle excess cash of $2.5 billion after taking into account the infrared acquisition and our anticipated debt redemption in September.
Our strong risk management strong balance sheet diversified and de risk business mix and innovative digital solutions and capabilities that support our clients and advisors all contribute to our strong positioning in continuing to manage through these turbulent times with that I'll turn the call back to leave for the Q and a portion of the call.
Thank you Kevin to help ensure that all of our participants have not 15 to ask questions on today's call asset. Each of these please limit yourself to one or two questions and then to re queue with any additional questions with that I'll I'll now ask to keep Jack please pull the participants for questions.
Thank you your first question comes from Gamble.
With National Bank financial.
Hi, Good morning, My first question for Jakone, and Dan I guess.
The group business.
We spent a long time talking Mclean I want to get a sense for the revenue or premium outlook.
Over the next 12 24, maybe 12 months.
But you have for the business, considering you know the trend and unemployment and maybe even business decisions like some employers may choose to.
Coverage to offset the premium increases you're probably going to you for the group.
Kevin I go first.
John what do we start with you in them and then move to Dan.
Thanks.
Good morning. Thank you for your question, if you point to have entre goods factors there.
Employment levels is something we've been watching.
Interestingly I have struggled with yet we haven't seen much of an impact so far.
There have been layoffs in many cases temporaries will benefit coverage has not necessarily stopped.
The other issue is looking at the segmentation of clients as you know in our Canadian business, we would have a larger proportion of large national accounts.
I think there has been more stability in that part of the the economy. So sectors of the economy of course, while still having an impact.
We also have what I would describe as mitigating factor as far as you know in our group businesses.
When people terminate they can roll over into individual products. So thats sort of plays a bit of an offsetting.
Impact so so at a macro level all the things you say are things that we also think about that are watching we haven't really seen that much of an impact of course.
The trajectory of the disease and the impact on the economy going forward is is going to have to be.
Watch carefully, but as I said, so far not that much of an impact.
And this is Dan Fishbein, let me add on for the us.
Date like shock is driving if we have not seen much impact.
Premiums revenues it stayed fairly close to where we would have expected them.
We have been watching that very closely we did.
Extended grace periods during the second quarter. Those have now largely ended and we have seen clients make the payments for any anything that was deferred and.
Grace period, so our premium receipts are right about where they would have been without the pandemic.
We think what's happening to some degree is that the terrorist activity you ask the government support has been very effective.
You combine that with the fact that.
It's clear that our clients value the benefits and want to keep providing them to people, even those who have furloughed workers have continued paying for benefit during those furlough period and certainly the government's reports have been very helpful. In that regard, we're obviously watching very carefully what's going on in Washington, right now.
Now with potential extension of those kinds of support.
That's right.
Working.
To us.
But with that said as we get into more structural lay offs versus furloughs.
We have to keep watching that because that could create a different dynamic in the coming months final comment I'll make like shock our mix is somewhat favorable we've measured that and evaluated that very carefully and the industries. We serve our somewhat more resilient in this economy, even the economy overall.
Thanks for both response, where my next question then when it's a bit more morbid.
But the core one two or life insurance business and mortality year.
I guess there.
Few mortality.
Or some negative mortality experienced this quarter, I guess, where that's coming from a more.
Curious, though about your your longer term outlook could maybe Kevin for you.
In other some direct impact from Covidien indirect economic.
Downturns or are you on lead to help issues and mortality rate moving higher.
And if it bias the long time them by could be a secular trend just wondering how you think your businesses positioned for potentially higher mortality rates over the next few years, you are long or short mortality I should say, but the other than that individual product mix.
The insured population also plays a role here.
Gave us going to suggest that Kevin Morrissey start with some of the answer to this question and then we can pass it to the business group presidents of Theres additional color debt because it is different as you noted is a little bit different by country and by market.
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Yes, and grow its Kevin Morrissey thanks for that question.
I think when we're thinking about the impacts of mortality, it's important for sound like to step back and look at different types of diversification and risk mitigation that we've had so so far what we've experienced as a result of cooladvantage insignificant product diversification.
As you're aware, we have booked life insurance and annuity products on so we are seeing some of that offsetting of risks. We're also benefiting so far from geographic diversification. So to date pandemic has been more severe you asked in UK and invested here in Canada Armed Asian countries, where we operate.
Also seeing significant risk mitigation for the impacts on the insured population versus the general population.
And so across those three dimensions, we're seeing some significant risk mitigation.
Also I would highlight we have good use of reinsurance across a number number of our blocks. So when we're looking across all of our businesses. We have the experience to date.
We have had.
Some significant diversification and that that.
He has helped us so far.
What we've seen other experience.
Longer term I guess, it's tough to say about the trajectory of what it will do.
For mortality I think we're still very early days in the pandemic.
And I think it's tough to draw conclusions around longer term, where this will grow so I think that this point until probably reserve opinion.
We're closely monitoring both our experience and industry experience some.
We'll have to I think time will tell longer longer term, but at this stage are lower intimate conclusions.
Okay gave it said dean and that I don't get that was a great answer Kevin I don't think we need to go by by geography, the only thing I would add to it is.
Significant.
Part of our mortality exposure is in our group businesses in Canada, and the United States, where we have the ability to reprice as you know so to the extent that that trends over the longer period turned negative on mortality. We can we can catch that up and relatively quick order through pricing.
Thanks. Thanks.
Your next question comes from the line of Steve Carell with capital.
Thanks, very much like answering the question on Asia likely for Leo currently on the sales from Hong Kong is coming through the pandemic very well in terms of terms of topline and sales.
More volatility in the local markets, Kevin gave a view from the top of the house and things are changing pretty swiftly in terms of additional waves, but the extent possible can you give us a bit of an update on what you're seeing sort of early Q3, maybe help us if you could point to geographies, where your outlooks getting.
Better or worse that will be helpful terms of how we think of the second half of the here.
Okay and good morning, Steve. Thank you for the question.
So as you look at our sales in Q2, maybe I'll start with with momentum.
If you recall, our Q1 analyst call we.
Shared sales for the month of April at 80% of prior year, we ended up the quarter.
Basically flat to prior year. So that tells you a little bit about the momentum this was a quarter, which we feel quite good about now as you mentioned the the trends are little bit different market to market. So would you talked about international hub Thats, our international business in Hong Kong being.
Quite strong in Q2 Roche, we also had strong results in.
In China and in Vietnam.
Whereas the market like.
Indonesia, Philippines, Malaysia, where we're quite a bit weaker I think you can link that quite directly to what's happening in terms of Cobiz 19 measures in these different market.
The southeast Asian countries had much more severe at levels that put in 19 cases, and therefore I'm much more severe social distancing measures throughout the quarter.
Now despite all of that I talked about some momentum across the region you can assign that in part to some of the relaxation of social distancing in not in southeast Asia, but also to a lot of the capabilities that we deployed to all of our markets.
In in Q2.
Well, we equipped our advisors with the number of new digital capabilities to allow them to interact with their Ron add their clients non face to face and to give you a bit of the sense of what that means for example, if you take the Philippines in the month of June 75% of our applications where submit.
Did you add digital remote capabilities.
We've also seen quite a bit of new creative and productive activities being rolled out across the region and so for example.
One of the waste our advisors operated that they created on client seminars.
And we typically bring 100 clients together in conference room and have an educational seminar in the middle of the crisis, we moved all of that to Webinars online and we're having attendance up several thousand.
Clients to joining these these digital venues. So all of that is a fueling good momentum, which is offsetting some of the headwinds related to social distancing measures.
So we.
We see that momentum across the region and then of course at the same time, we do see.
Quite a bit of uncertainty into Q3 as you would have seen Vietnam and Hong Kong I've had a resurgence of Cowen 19 cases, Hong Kong is going through with toughest wave of social distancing measures. So far in the last six months.
So that's definitely a headwind as the Philippines announced a new set of social distancing and quarantine measures earlier. This week. So that's also going to obviously the headwind.
We're we're cautiously optimistic in terms of the momentum.
Of our business all of these headwinds notwithstanding.
Can you give a sense you last quarter you mentioned how April is 80% of prior year can you does that can you rolled up into something in terms of July.
So it's Kevin.
We gave the disclosure for total company at 95%, but we weren't going to break it up by business group. You can you can imagine that it's a that's pretty current information. We just ended July a few few days ago and so we're trying to give keep that at the total company level, but maybe little can talk a little bit more kind of trends in the quarter, which I.
Thank you sort of addressed by.
The nature of what's happening.
Yes, I think.
What you described of global level, Kevin it's.
Quite in line in terms of momentum April versus versus July the trends would be similar in the context of of Asia.
Okay. Thanks for that and just if I could second question.
Going to MFS and thanks Leo.
I wanted to ask coupled institutional business, you had been running at five or $6 million quarterly.
Gross sales first start to time there.
At the last couple of quarters, let's jump to the $10 billion range through a difficult Q1 and.
What was a better Q2.
So so Mike are you seeing indications that you are turning the corner after a more challenging period for the institutional side and maybe a bit color on what's resonating with the institutional client base is it isn't as simple as performance or is there some better uptake in some of the initiatives you've been working on for the last a year or two.
Good morning, Steve This is Mike.
Yes, I would just say the work that we've been doing too.
Continue to broaden the opportunity set around the world by client.
It's interesting I think with MFS relative probably to what you're seeing broadly in the active marketplaces is much of what we've been distributing institutionally has been equities and so we are winning in the equity platform.
And I now would also say from a product perspective is we did see.
Several years of redemptions and institutional channel there have been some strategies that were capacity constrained that we reopened and we've seen some interest in those as well and so I think there were a number of things that we're doing.
In terms of prospecting engaging with clients cross selling to existing clients and I do believe the investment platform on the consistency of the performance in risk management.
Resonated around the world and we're seeing a lot of interest in a variety of products Cross platform.
Okay. Thanks for that color I'll leave it there.
Your next question comes from the line of David Matson Needham with Evercore.
Thanks, Good morning.
Just a question for Leo and specifically in the international hubs sales.
That was a very strong results.
Maybe you can give some color in terms of what was driving that and what region, specifically, what's driving that because my understanding was there was a lot of Hong Kong driving the international high net worth sales and I would think that those require more of a face to face meeting to to close. So just wondering if I could get a bit more color on on.
What was driving that during the quarter.
Thanks, Thanks for the question David in terms of international hub sales, there's really two factors that I would.
Point you to the first one is our strategic focus on the high end four segments over the past few years and then second one is more of our technical aspect of the sales cycle of the height of course product right. So on the first point of a strategic focus we've.
We've made high net worth one of our key strategic priorities in Asia I wanted to past few years as you will remember we brought international into the Asia business group in 2018, given its natural alignment with the Asian market than we launched our high networks business in Hong Kong onshore into south.
Isn't an 18 as well and then more recently in Q1 of 2020, we brought these operations together under one roof as international hub and through that process that we've really strengthened our product suites, we enhanced our technology capabilities to support our brokers and distribution partners and we.
Deepened our relationships with banks and international broker significantly and so one of the things you're seeing in the momentum as the sales is those efforts paying off.
And then the second thing that you're seeing that as a little bit staggered to maybe other market. Given cobot 19 is that it can take six to 12 month affords the sales cycle at the high net worth sale and so some of the high net worth sales. We saw in Q1 in Q2 up this year are really.
From our pipeline generated in 2019, and so we're really benefiting right now from the momentum we generated in 2019.
Got it thanks, if I could just follow up is is there a lot of.
Mainland Chinese visitors.
In that in that high net worth business in Hong Kong is that a big component of the of the sales.
No. It's it's a very small part of the sales that at the current time, it's always been a small part of of our business in general.
So with okay.
On any it's.
The rest of Asia really.
Got it okay. Thanks, and then just a bigger bigger.
Bigger picture question for Dean.
I wanted to get your insight into what happened in Hong Kong with the Security Act and how that impacts how you're thinking about growth in the country and potential M&A there.
Yes, Thanks, David the National Security law.
Is.
Clearly a it's an important development that we've been studying and comparing notes with other financial institutions in the region I think it's too soon to say what impact we understand.
The background the rationale in the different points of view on it I think for our business for the industry, it's too soon to say.
For the time being it feels like business as usual in the sense that.
You know businesses the access to capital the access to.
Courts the access to.
Talent all of those things that cause us to want to for the last 125 years want to be in Hong Kong all of those continue and.
I think the question that we'll we'll watch closely and I know others are watching closely as to what extent will that change for the time being.
We continue to see access to strong talent, we've got a great team in Hong Kong, both in our local business and in the regional office and we think that will continue for some time, but at some in some ways I think it's too soon to say.
Whether whether or not it will have significant impact on business.
Great. Thank you.
Your next question comes from the line as many.
With Scotiabank.
Hi, Good morning, just a question on M&A I'm wondering is Comping has changed how you view M&A right now just in terms of.
Our potential to be more opportunistic if you're seeing anything and then specifically I know you mentioned.
Investment in dialogue that was very small, but I'm wondering larger.
[music].
In the larger terms your perspective on tech investments and potential to deploy enlarged tech investments as your appetite for that change and do you see any platforms out there are companies that would potentially make sense.
Yes, thanks, many it's dean.
So we continue to be.
In the mix in discussions on M&A as Kevin noted and as I've noted and as we've talked about before we have a balance sheet and a a cash and capital position leverage position that I think.
Puts us in in a good place in terms of considering M&A opportunities.
We don't have to do M&A, we we have good organic growth opportunities.
As you see coming through this these quarterly earnings results.
As we look at opportunities.
One of the additional lenses that we will apply given we're in the middle of a.
Pretty significant.
You know event to with co bid in the economic impact is we will apply an additional stress scenario. So.
If we end up with the severe stress scenario as one of our tail events coming out of this you know we want to make sure our capital position remained strong. So thats just an additional lens that we would apply to anything that we look at specific to tech investments you've seen us make some investments in tech businesses like Maxwell health and.
Now now dialogue.
That's provide additional capability that we can integrate to the benefit of our clients for the benefit of our clients and we're seeing that with Maxwell health in the US It is making a difference in winning business and getting more lines of coverage in place when we take employees through and.
Employer through a Maxwell how enrollment process and similarly, you know, it's quite remarkable joc and his team in Canada.
Have signed up is over half a million Canadians, who now have access to dialogue virtual healthcare coverage just in the last quarter, because we pushed it out and we made it available and and made it easy to to connect with and so.
So I think and that is exactly in line with our purpose and our strategy and it kind of fits with the Luminato digital health platform that we've been building so.
I think for tech investments.
The first filter that we look at as does it help accelerate our core business does it help deliver on the purpose of the company and and I think you'd say in the case that dialogue in the case of Maxwell It ticks those boxes, so I'll stop there.
Thank you.
Your next question comes from the line, Doug Young with Chardan capital markets.
Good morning, I guess this is probably for Kevin I think can Marci I think you've had negative mortality experienced in the US closed block and I think even if you exclude covert you can kind of timing im wrong.
Just just thoughts on the trends there and do you need to make adjustments.
To your assumptions and I think thats something that you're studying as part of your Q3 assumption review any early insights into that potential impact from that review.
Thanks for the question Doug This is Kevin MRC, Yes, you've noted correctly that the U.S. mortality experience.
Negative in the quarter in the U.S. enforce welcome sleeve shirts business and it has had a bit of a negative trend over several consecutive quarters. So as we're looking to the updating Q3 in terms of assumption I think thats one of the areas, where we're seeing some some potential stress which in turn.
And strengthening so I think you're right directionally and when I look kind, maybe pull the loans back more broadly on the Q3 acma.
We're still quite early days and we are seeing some significant positive items as well as significant.
Negative items and so.
It is too early to tell now about Q3 results in total if we knew about a large net positive or net negatives, we will disclose it yes.
We're not at that point, yet to be able to two will have a clear view on the overall net impact.
And can you outline what some of the positives would be like.
So mortality in the us as a negative what would be some of the positive items that you'd be thinking though.
Doug It's Dean I think it's too early to talk about Q3, Acma. So let Kevin off the hook on that one I will have a full full discourse to that as part of our Q3 earnings.
Fairpoint.
And then maybe to yourself Dean Sun life investment.
Investment management.
Had 30 million of earnings 12 million in Q1.
Yes, when when I look back at the 2016 Investor day.
It looks like you've hit the targets on a.
Looks like you've hit your EPS targets roughly speaking.
Mature and trajectory to do so so what's next for this this business. It's been an area, where we think of M&A in lot of people think about M&A. You think we think Asia. We can give US group, but also I think this has been an area that in technology, but this has been an area you've been active.
What's next for this this business.
Doug It's dean Thank you for the question and I'm going to ask Steve Peacher, Who's President of SLC to comment on that but I would I will be for Steve speaks I would just say that we're very pleased with the progress here you are right to point out that we've gone from zero to $100 billion of AUM in a relatively short period of time and we're starting to see some.
Meaningful net income come from the business now weve allocate a lot of capital here. So we need to see that income growth to generate the kind of aro ease that we expect on that allocation of capital over the Formosa time, so with that I'll turn that over to Steve to give you a little more color on on how we think about the future.
Yes, Thanks, Dean and thanks for the question, Yes, I think Ted I'm really pleased with as you point out today with the acquisitions and the organic initiatives. We've had we've built a pretty broad platform today across real estate in fixed income and private credit and infrastructure with infrared and I think in terms of the future R.R.R.
What's in the opportunities in front of US is to start to connect dots across that platform and one of the things that I've been really pleased about in this during this pandemic is a how much new business for winning but also the breadth of that business. So if you look at the last few much months, we've won mandates and.
Fixed income and private credit in value add real estate in Europe, and Asia, We had our first closing on a us core plus real estate fund.
And so the breast is starting to come through and also when you look under the covers we're winning business that no one entity could have one on their own but we're winning because we're connecting dots across the organization and I think thats going to be keeling forward I think in terms of future M&A I want to thanks, I've said in the past is the one big areas.
And if we can wait for magic wand would love to add would be in that below investment grade private credit space.
And maybe that will we will be able to slot that end, but even without that I think weve im really pleased with the breadth and depth to the platform we have today.
Yes.
Great. Thank you very much.
Your next question comes from the line of Paul holding with the ITC.
Thank you good morning.
Have a couple more questions on.
Asset management.
Because of investments made in last few years my understanding of the large proportion.
I am would be.
Real estate investments, so first maybe from Florida.
On tax.
Terms what proportion.
Real estate.
Second part of that question, probably the more important one is how are you thinking about.
Risks and the real estate market.
As it pertains to both sales and I guess on balance sheet.
Correct.
Well.
Maybe the potential for.
Hello.
Out of that product category.
Yes, Hi, Steve Peacher, I'll take the first part of that and.
As it relates to real estate on the balance sheet.
Randy Brown may want to also comment in terms of our AUM related to real estate I would say today and I don't have the exact number in front of even it's probably about a third of vessels sees.
When when you think of direct real estate now we also have commercial mortgages, which is real estate related but of course as more fixed income characteristics given senior nature of the loans that we make against real estate.
In the quarter, obviously your Steve some of the dynamics, you're seeing across the real estate markets on average I think if you look at our third party portfolios and our balance sheet, we probably on average saw values down 2% to 3%.
But when you look under the covers there's a lot there obviously retail assets would be down significantly more office assets would depend significantly based on location. Many industrial assets were actually up in evaluation because of the increased demand given the.
Online economy. That's that's emerged in this crisis I think you're seeing cap rates actually start to come down because risk free rates have come down so much risk premiums are widening, but you're seeing cap rates comes come down so youre seeing a lot of cross currents in terms of the drivers of real estate values.
I think and we are seeing in some of our funds.
Some redemption activity as people think about reallocations, but I think maybe more than that actually we're seeing interest in allocating to the sector with the idea that there will be value there'll be values in the market going forward as I mentioned on the in response to last question. We had our our first close for a new us core plus fund that Vince.
Ill Greenock is running in the past quarter and Weve continued to raise significant money in Europe and Asia for real estate funds there. So.
I actually think we're seeing investors interested in values that may develop as a result of the current market harm.
Yes, and Paul This is Randy Brown, so with respect to the balance sheet.
As you saw we had eight a modest write down in the portfolio for the quarter largely driven by.
Retail down.
A couple of idiosyncratic markdowns in office, but broadly office did fine, but an uptick in industrial as Steve said in terms of value as I think about real estate going forward.
I actually think theres quite an opportunity there with interest rates tenure interest rates at 54 basis points long rates in Canada, even lower.
I think that the return opportunity away from fixed income broadly.
His will become even more attractive than it has been in the past. So I think to the jury Theres a lot of talk on real estate and real estate valuations in the future of office in those those types of discussions, but I'm actually quite optimistic you may get a minor debate here as you look in in prices.
As we look forward, but if you if you look up as a long term investors. We are I think it's great opportunity, there and aligns quite nicely with Stephens talking about with the growth of SLC.
Great appreciate the color and I'll leave it there.
Your next question comes from the line of Tom Mackinnon with BMO capital.
Yes, thanks very much morning.
Expected profit that my first questions about expected profit growth.
Kevin you said.
Looks to be up nicely in both U.S. employee benefits and in Canada, and you said the driver of that was widespread growth.
Maybe you can.
Give us a little bit more color because it seems to be the second quarter expected profit seems to be up nicely year over year and running higher than the kind of quarterly run rates, we saw in 2019.
And to what extent as sort of improving operational leverage help these numbers as well and then I have a follow up.
Okay. Thanks, Tom I'll, just start I'll start off by saying that that you heard the numbers in my sort of prepared remarks and.
SLC benefited from the addition of Biggio and that explains a big part of the growth, but we continue to see good flows inside of vessel fee and Steve just talked about that.
Im going to let.
Joc talk about expected profit growth in Canada, and Dan talk about the expected profit growth in.
In the us and legal maybe a little bit on on I think levels, probably covered what you've seen anyway. So I think the two key stories there are joc and Dan. So maybe we'll start with shock on Canada expected profit and then go to Dan.
Thank you Kevin.
Good morning, Tom.
So, yes, 12% growth and expected profit Q2, 20 over Q2 19.
Were pleased with that as you can imagine in terms of absolute number but we're also pleased because.
We're seeing expected profit growth across all of our businesses, it's not the case, though.
One business that was a strong locomotives or the rest here.
We're seeing widespread broken by the way I would point out Tom.
The six quarter in a row in Canada that expected profit was up either a 9% or more.
What's happening is essentially a couple of things, yes, that's driven by business growth I would say that's about half of the other half.
His strong extra expense discipline.
On the business growth side of things.
We have a lot of focus we've just talked a few months ago about digital investments well give you.
A quick fact year largest digital coach in Canada.
In the first six months of this year has driven an extra $500 million, though deposits while our plan members. So that's obviously a good our digital assets are helping us win more business there how in helping us grow the business.
We've got some of our growth engines, we've talked about in Investor day, whether its ethanol JPY defined benefit solutions on the.
What we call the Worksite advantage when our clients solution.
All of these are really coming on strong and helping to grow were expected profit.
The other side of it as the expense as I said, we mentioned in 2018, we made a pretty significant step change in listening ventral and the management of our expenses.
And you're seeing that come through as well so that.
A combination of strong expense discipline and.
Strategic investments and very important growth areas is definitely helping heregulin away I would say Tom.
Last few years, we've put the right building blocks in place to increase the earnings power of the Canadian segment, and that's what you're seeing.
And.
Good morning comments, Dan Fishbein.
Just some comments on the you asked first the technical comments.
Our biggest sales month of the year is January onest, especially for our stop loss business. So those sales show up in new business gains in the first quarter and then they transition over to expected profit in the second quarter. So we when we have a big January you see a big growth than expected profit in the second.
Quarter, but with that said like jocks comments, we are seeing growth and expected profits across all our businesses.
Of course, I, FM, which is actually a negative by definition each month of the results or even a little better than the.
Here.
A lot of that is being driven by growth volume growth in the stop loss business. Obviously that business continues to have great growth over the past few years, both in retention of business and.
Sales were also seeing good growth in the group business a lot of that is coming from achieving our target pricing margins.
That is starting to make a really big contribution there and we're also seeing growth.
Our full scope business so.
There is growth across the board. In addition to that Q1 to Q2 technical issue.
Great and then in terms of my follow up question.
Yes.
The yet the impact of change in the fair value investment properties that Sean.
On slide 13 to be 55 million pretax.
Now.
Right.
I believe this the is it your commercial real estate investments that are on balance sheet and the backlog.
Liabilities and changes in fair value. These have an immediate impact on earnings.
And the number you show on that slide is really the impact here as it relates to year nom par business.
First of all do I have that correct.
And secondly, what is this a between car what was the decline in the quarter in the fair value. I think you had said it was modest but what was the fair.
How was that decline split between year par block.
And your non part block.
Kevin Morrissey do you want to take that question.
Sure I'll start and maybe Randy I'll ask you to happen for the questions. So the the for where you started Tom was was that the nonperforming talked the answer is yes.
You are asking about whether thats backing liabilities and thats, yes, as well so it is.
Backing that.
As far as the third part of the question maybe I'll ask.
Randy if you want to.
Sure well, yes, I'll take that one thank you.
Thanks, Tom for the question so the change in the real estate valuations as Kevin said.
He is backing long term liabilities, I think really which.
The so part of your question really gets to the return.
Which was.
In terms of valuation we were down approximately.
A little under 3% in Mark to market than we had income.
Income return to offset that so if you look at it in total return space, we were actually pretty much unchanged.
Roughly zero total return to the income component.
But what you see is the change in valuation as I said earlier that valuation was really driven largely by retail down industrial up.
In a couple of those idiosyncratic buildings.
In the U.S in office.
So.
This is a 7.4 billion portfolios so 3% decline is over 200.
Million dollars pretax.
Sure 55 million pre tax is that because then.
About three quarters of that block would back part is that do I have that right.
Tom it's kind of more C.
Yes, if you're thinking about real estate and the liabilities held that split new cost our non par we'd have a proportionately higher amount.
Our blocks and so.
I think directionally, you're on the right page carrying that the majority would certainly.
The in if you're looking at real estate majority would be in par and when looking at what happened in the quarter. The par impacts would have been larger thats right.
Okay. Thanks for that.
Your next question comes from the line of Nigel This is though within their top investment.
Thank you good morning.
First question I, just wanted to touch on credit experience and I know noted that in the quarter looks like the impact from changes in ratings and impairment.
Picked up quarter over quarter. So I was wondering credit experience can you speak to other drivers were and how do you see those two components playing out over the coming quarters.
Randy can you.
Address Nigels question.
Sure.
Nigels Randy Brown. Thank you for the question. So what we saw was as Kevin mentioned, we took a.
A pretty hard look.
At the whole portfolio, given the impact to covert and given the the global shutdown and therefore, the economic impact of that.
So.
Migration as you've seen the slides.
Was was post tax about $60 million.
With impairments about 24 impairments were largely.
What I'm going to call.
Mostly noncovered related they recovered influence, but it was largely the same.
The same loans.
That it had issues prior continuing in there in their trend.
In terms of migration.
What you saw there was largely the majority bring the sectors we identify.
In the Mdna as you would expect.
Yes ratings migration was really not unexpected or to review has been that ti in an economic slowdown the rating agencies with downgrade further and faster than they have in the past and we're seeing that materialize.
And with and we did that as I said pretty hard look to the quarter.
Okay.
Yes.
Sorry, I, just Kevin I, just might just even stress that we took a really hard look at.
All the sectors that we thought were most impacted them. We we continued to review other sectors as well so there was a.
Randy and his team along with the.
The the credit risk guys and in the finance team took a really really deep dive on the sector and got through way more loans than we would ever typically get through and may more private fixed incomes on on a given quarter. So they worked worked really really hard and really accelerated their reviews.
Okay. That's it that's really helpful and the last question I had was on capital restrictions and Kevin you touched on this in your prepared remarks I know, it's early but do you have any sense on when you may get the green light on on dividend increases in buybacks and I understand that you may not be able to answer that in terms of timing, but maybe in relation.
In two banks and Nonbanks financials, and the reason assets because the period that you're better positioned on on capital balance sheet Hatteras exposures and you're earning stability. So do you see OSP blistering restrictions for you and other insurers ahead of other financials or do you expect off see when it does.
Move.
Move across the board and for the entire sector. Once the risks related to call that are in the clear.
So I do we have a lot of discussions with with us fee and.
They haven't given any indication yet of what they might do in terms of lifting the restrictions on either the buyback or the dividends I do know that they look at the insurance industry separately from the banking industry is you're noting and we have sessions with.
Hi, self and call them and cabin with the Cfos zero and chief Actuary from the other companies with US we it's something we we continue to distress our strong capital position certainly add.
We we stress ours and they stress there is our strong capital position and where we're at so it's but they haven't given any indication in terms of what the timing might be.
Alright appreciate the color. Thank you.
Your next question comes from the line of Scott Tan with Canaccord Genuity.
Good morning.
You are.
Managers have offered some.
Guidance on timing and potential range and I was wondering if you could update us not if you can.
Kevin Worsley do you want to give an update on the your.
Yes. Thanks for your question Scott This is kind of marci.
So as you probably heard the actual standing boards is going to be reviewing the U.R.R. SB review and analysis is not done yet so I don't know if a change will be made but if it changes made by the ASP would be promulgated next year and we would make our update at that time.
As a reminder of the last you are change was in 2019 wherever you are decreased by 15 basis point.
But $93 million after tax loss.
Great. That's all been just lastly, maybe I missed that Mike.
I guess similar to Steves question, but just on the retail side because sales are really picked up the last two quarters.
The 25 to 26 billion range versus 17 run rate.
Some of the two factors that you talked about institutional relate to retailers or something in the industry, where the retail industry that's driving that.
Yes, thats a little bit different.
Scott on the retail side and that is what we're seeing is.
Providers consolidating or listen to providers.
Our counterparts, and so and you can see that when you look at slows in the industry is is the flows and inactive funds continue to be in outflows, but where you are seeing flows as they continue to consolidate into fewer players and so we see a number of funds being sold within providers in the marketplace and.
So we're benefiting from that we've seen really we've seen that trend accelerate through this period of cobot.
And we've been expecting is for a number of years and we would expect it to continue to happen. So.
[music].
The the platforms are consolidating the lister providers. They are consolidating the funds that they use and firms like MFS are benefiting from that and I think thats, probably the biggest impact year over year.
Great. Thank you very much.
Your next question comes from the line of friendly with Dowling and partners.
Good morning, Thanks for taking my questions.
Maybe a question for Kevin just thinking about expenses.
Thank you will hurt different companies talking about the current environment.
You do have a little bit of the tailwind for expenses from from a teen you perspective.
But looking at the expenses for this quarter is a little bit of a negative variance like I'm just wondering.
How you see can expenses kind of us in this quarter and also as was the coming quarter, given some of the disruptions and how you're thinking about the expense efficiency.
Yes. Thanks on pre so we obviously have a very strong focused on controlling expenses and we benefit from business group leaders, who you've heard earlier, who see this as a priority.
The the uptick this quarter really related to as I mentioned earlier, the group and the benefits DSO administered services business and just the the level of claims that has come through in that showed up in the expense line, but you know.
We are very focused on expenses. We've we've got we are seeing the tailwind as you mentioned from some of the Cove and things like travel in conferences, but we're also investing in technology and that thats absorbed in the rate, but overall you know very modest growth in terms of controllable expenses at 2%, which is which is in line with how we're.
Growing the business right or even less than so we see expenses as being.
Having a lot of potential to support their earnings going forward.
Expense declines.
All right.
Good question fall for Mike.
MFS.
Yes, like looking at the the margin for this quarter like normally I think historically you've talked in past that like when you have a positive mark is that tends to be a tailwind to to the margin just looking at the asset growth looking at the equity market performance this quarter.
We would expect the margin be a little bit better it seemed like a time lag between kind of how the margins will improve.
Relative to market conditions, and you and growth.
Hi, Good morning, Humphrey I think there a couple of things. The first is is it just thinking about the market.
Most people's or thinking about the market like to use the S&P, we've got a significant piece of our assets outside of the U.S. and markets outside of the U.S. lag fixed income markets, obviously did not move with with us equity market. So revenues didnt necessarily move with the S&P that would be the first.
If you look year over year Q2 does tend to be a lower margin quarter, because amortization stock compensation and you tend to see the margin expanded in the back half of the year and that's that's happened year over year for the last number of years and so I don't think there was anything in the quarter.
That was.
Any different seasonally than what we've seen historically, a again revenues would have been impacted by the relative market performance around the world.
<unk> expenses were relatively in line and Kevin did call I mean, one of the one expense line in the quarter. It's because sales were up so dramatically year over year. We has had some sales based expenses expenses have been higher that are offset by travel and entertainment technology and other expenses and so we've guided in the past than a normal market environment while this.
Certainly hasn't been normal, but if you look we are the big decline in March April Big increase offer that base as you look at the first six months of your we provided guidance of mid to high Thirtys is something that we see through cycle and were within that range and so I don't if there's anything extraordinary.
I would call in the quarter.
Okay got it thank you.
And we have no further questions at this time I'll attendees to Miss Thomas for closing remarks.
Thank you and I would like to thank all of our participants today. If there are any additional questions. We will be available after the call. After the call and we wish to listen to the recording it will be available on our website later this afternoon.
Thank you and have a good day.
This concludes today's call. Thank you for your participation you may now disconnect.
Okay.
Yeah.