Q4 2021 Midwest Holding Inc Earnings Call

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Thank you for your patience. The Midwest Holdings fourth quarter and full year 2021 earnings call will begin in approximately one minute. During the presentation you will have the opportunity to ask a question by pressing star followed by one on your telephone keypad.

Thank you for your patience, the Midwest Holdings fourth quarter and full year 2021 earnings call. We'll begin inappropriate monthly one minute. During the presentation you would have the opportunity to ask a question by pressing star leased by one on your telephone keypad.

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Lauren: Ladies and gentlemen, welcome to the Midwest Holding fourth quarter and full year 2021 earnings call. My name is Lauren and I'll be coordinating your call today.

Ladies and gentlemen, welcome to the Midwest Holdings fourth quarter and full year 2021 earnings call. My name is Lauren and I'll be coordinating Yoko today if.

Lauren: If you would like to ask a question during the presentation, you may do so by pressing star followed by 1 on your telephone keypad.

If you would like to ask a question during the presentation you may see site by pressing star one on your telephone keypad.

Lauren: I will now hand you over to your host, Tom Brumbelow, to begin. Tom, please go ahead.

Now how did you have to have a bump like speaking Tom. Please go ahead.

Tom Brumbelow: Good afternoon and welcome to Midwest Holdings' fourth quarter and fully year 2021 earnings call.

Good afternoon, and welcome to the Midwest Holdings fourth quarter and full year 2021 earnings call. This is Tom Bumbalough head of business development and distribution area Midwest. Joining me for today's presentation will be our CEO Georgette Nicholas as well as our Chief Financial Officer, Eric Berg his appointment as CFO of the company was announced earlier today.

Speaker Change: Tom Bumelow, Head of Business Development and Distribution here at Midwest. Joining me for today's presentation will be our CEO , Georgette Nicholas, as well as our Chief Financial Officer, Eric Berg, whose appointment as CFO of the company was announced earlier today.

Tom Brumbelow: Yesterday evening, Midwest issued its Q4 and full year 2021's earning release, announcing our financial results.

Yesterday evening Midwest issued its Q4 and full year 2021, earning release announcing our financial results.

Tom Brumbelow: During today's call, we will reference this announcement, a copy of which may be found on the Investor Relations page of our website at ir.midwestfolding.com.

During today's call we will reference this announcement a copy of which may be found on the Investor Relations page of our website at IR Dot Midwest holding dot com.

Tom Brumbelow: While this call will reflect items discussed within that document, for more comprehensive information about our financial performance, we also encourage you to read through our 2021 Form 10-K , which has been filed with the Securities and Exchange.

All of this call will reflect items discussed within that document for more comprehensive information about our financial performance. We also encourage you to read through our 2021 Form 10-K , which has been filed with the Securities and Exchange Commission.

Tom Brumbelow: Before we begin, I want to remind you that matters from today's call will include forward-looking statements related to our operating performance, financial goals, and business outlook, which are based on management's current beliefs and assumptions.

Before we begin I want to remind you that matters from today's call will include forward looking statements related to our operating performance financial goals and business outlook, which are based on management's current beliefs and assumptions.

Tom Brumbelow: These forward-looking statements reflect our opinion as of the date of this call, and we undertake no obligation to revise this information as a result of new developments that may occur.

These forward looking statements reflect our opinion.

As of the date of this call and we undertake no obligation to revise this information as a result of new developments that may occur.

Forward looking statements are subject to various risks uncertainties and other factors that could cause our actual results to differ materially from those expected and described today.

Tom Brumbelow: Forward-looking statements are subject to various risks, uncertainties, and other factors that could cause our actual results to differ materially from those expected and described today.

Tom Brumbelow: In addition, we are subject to a number of risks that may significantly impact our business and financial results.

In addition, we are subject to a number of risks that may significantly impact our business and financial results for more detailed description of our risk factors. Once again. Please review our 2021 Form 10-K , where youll see a discussion of factors that could cause the company's actual results to differ materially from the statements.

Tom Brumbelow: For more detailed description of our risk factors, once again, please review our 2021 Form 10-K , where you will see a discussion of factors that could cause the company's actual results to differ materially from the statement.

A replay of this conference call will be available on our website under the Investor Relations section I would also like to remind you that during the call we'll discuss some non-GAAP measures and addressing Midwest performance you.

Tom Brumbelow: Replay of this conference call will be available on our website under the Investor Relations section.

Tom Brumbelow: I would also like to remind you that during the call, we'll discuss some non-GAAP measures in addressing Midwest performance.

Tom Brumbelow: You can find the reconciliation of those historical measures to the nearest comparable GAAP measures in our earnings release and in our 2021 Form 10-K . Now I'll turn the call over to Georgette Nichols.

You can find the reconciliation of those historical measures to the nearest comparable GAAP measures in our earnings release and in our 2021 and Form 10-K .

Now I'll turn the call over to Georgette Nicholas to share our results.

Georgette Nichols: Thanks, Tom. Welcome to Midwest's fourth quarter and full year 2021 earnings call. We appreciate you joining for an update on the company's progress. And today I'll cover the financial results for the fourth quarter and the full year.

Thanks, Tom and welcome to Midwest fourth quarter, and full year 2021 earnings call. We appreciate you joining for an update on the company's progress and today I'll cover the financial results for the fourth quarter and the full year.

Georgette Nichols: Then discuss market and business trends, our strategic focus and the steps we are taking to carry out our strategy and grow the business.

Then discuss market and business trends, our strategic focus and the steps, we're taking to carry out our strategy and grow the business.

As we reflect on 2021 Midwest had a challenging year with various changes and headwinds encountered in the execution of its strategy.

Georgette Nichols: As we reflect on 2021, Midwest had a challenging year with various changes and headwinds encountered in the execution of its strategy.

Georgette Nichols: The year showed growth and key accomplishments, but also the challenge of growing a new business in a dynamic market and establishing a foundation to build upon.

The year showed growth in key accomplishments, but also the challenge of growing a new business in a dynamic market and establishing a foundation to build upon.

Georgette Nichols: We are taking steps and focusing our efforts on the key drivers of the business to position ourselves to rebuild during 2022.

We're taking steps and focusing our efforts on the key drivers of the business.

<unk> ourselves to rebuild during 2022.

Results for the fourth quarter of 2021 showed a reported GAAP net loss of $7 million down.

Georgette Nichols: Results for the fourth quarter of 2021 showed a reported gap net loss of $7 million, down from $11.9 million net loss reported in the prior year quarter.

Down from $11 9 million net loss reported in the prior year quarter.

Driving this improvement with an increase in total revenue, which reached $16 million in the quarter compared to negative total revenue of 831000 reported in the prior year fourth quarter.

Georgette Nichols: Driving this improvement was an increase in total revenue, which reached $16 million in the quarter, compared to negative total revenue of $831,000 reported in the prior year's fourth quarter.

Georgette Nichols: For the full year 2021, Midwest had a gap net loss of $16.6 million compared to $12.4 million in the prior year.

For the full year 2021, Midwest had a GAAP net loss of $16 6 million compared to $12 4 million in the prior year.

Georgette Nichols: Revenue increased to $30.1 million this year, up from $10.6 million in the prior year, driven by an increase in investment income and realized gains, along with service fee revenue.

Revenue increased to $30 $1 million this year up from $10 6 million in the prior year driven by an increase in investment income and realized gains along with service fee revenue.

Georgette Nichols: This was offset by an increase in total expenses of $41.9 million, up from $21.4 million in the prior year.

This was offset by an increase in total expenses of $41 9 million up from 21 4 million in the prior year.

Georgette Nichols: The increase is from interest credited given the growth in premium year over year and an increase in salaries and benefits and other operating expenses to support the business.

The increase was from interest credited given the growth in premium year over year, and an increase in salaries and benefits and other operating expenses to support the business.

Georgette Nichols: These additional costs were incurred to attract employees for legal and consulting to support transactions and investment structures, along with state expansion and technology initiatives.

These additional costs were incurred to attract employees for legal and consulting fees for transactions and investment structures.

Long with state expansion and technology initiatives.

General and administrative expenses on a management basis, a non-GAAP measure with $24 6 million for the year up from $12 9 million in the prior year.

Georgette Nichols: General and administrative expenses on a management basis, a non-GAAP measure for $24.6 million for the year, up from $12.9 million in the prior year.

Overall annuity direct written premium on a statutory accounting basis for the year with 471 6 million up from $415 6 million or 13, 5% increase.

Georgette Nichols: Overall, annuity direct written premiums on a statutory accounting basis for the year with $471.6 million up from $415.6 million or a 13.5% increase.

Georgette Nichols: The growth year over year reflects a strong first half of 2021 while the back half of the year encountered a challenging sales environment.

The growth year over year reflects the strong first half of 2021 by the back half of the year encountered a challenging sales environment.

Premiums written were $104 2 million in the fourth quarter of 2021, compared with $136 1 million a year earlier quarter and down from $117 9 million in the third quarter of 2021.

Georgette Nichols: Premiums written were $104.2 million in the fourth quarter of 2021, compared with $136.1 million in the year earlier quarter, and down from $117.9 million in the third quarter of 2021.

We're experiencing intense competition in the market for a new news with aggressive pricing.

Georgette Nichols: We're experiencing intense competition in the market for annuities with aggressive prices.

Georgette Nichols: We've been reviewing pricing along with our reinsurer appetite to ensure we continue to grow the business while managing risk and profitability.

We've been reviewing pricing along with our reinsurer appetite to ensure we continue to grow the business while managing profitability.

It expansion efforts have taken more time than anticipated states you'd like to see more meaningful financial footprint.

Georgette Nichols: State expansion efforts have taken more time than anticipated, as states would like to see a more meaningful financial footprint.

Georgette Nichols: We are working to file in more states, responding and providing increased information to regulators, and discussing how the model ensures policyholders are protected, given the capital held and supported by the use of reinsurance.

We are working to file a more states responding and providing increased information deregulated and discussing how the model insurance policyholders have protected given the capital held and supported by the use of reinsurance.

Georgette Nichols: This will take time, but it is a strong focus and priority for the U.S.

This will take time, but it is a strong focus and priority for the year.

Ceded premium or that portion of our new business. We passed a non consolidated reinsurance was $43 8 million in 2021 fourth quarter, a 42, 1%.

Georgette Nichols: Seeded premium, or that portion of our new business we passed to non-consolidated reinsurers, is $43.8 million in 2021's fourth quarter, or 42.1%.

Georgette Nichols: compared with 50.1 million or 36.8% in the fourth quarter of last year.

Compared with $50 1 million or 36, 8% in the fourth quarter of last year.

Georgette Nichols: For the full year 2021, we've seeded 50.3% of premium compared to 54.9% in 2020.

For the full year 2021, 53% of premium compared to 54, 9% in 2020.

Georgette Nichols: Another consideration in looking at ceded premium is the amount that goes to our captive reinsurer, Seneca Re, where we warehouse premiums and sell until a reinsurer is put in place.

Another consideration and looking at ceded premium is the amount that goes to our captive reinsurance Seneca re warehouse premiums so until a reinsurance put in place.

Georgette Nichols: As part of the sale to Oryx, 70% of SRC1, or approximately $130 million of premium, was economically sold or reinsured and is not reflected in our GAAP financials due to our continued consolidation of SRC1.

As part of the sale to org, 70% of FERC, one or approximately $130 million of premium was economically sold or reinsured. It is not reflected in our GAAP financials due to our continued consolidation of Src one.

Georgette Nichols: If we include the premium economically ceded to ORIS through SRC 1 for which statutory capital credit is received, the ceded premium for 2021 was 77.9% versus 54.9% in 2020.

If we include the premium economically ceded or Src, one for which statutory capital credit is received the ceded premiums for 2021 was 77, 9% versus 54, 9% in 2020.

Overall, we received $13 4 million in ceding commission fees during 2021 compared to $12 5 million in 2020.

Georgette Nichols: Overall, we received $13.4 million in seating commission fees during 2021 compared to $12.5 million in 2020.

Georgette Nichols: For gap purposes, city commission is deferred and earned over the life of a policy.

For GAAP purposes, Ceding Commission is deferred and earned over the life of the policy.

Georgette Nichols: As of December 31, 2021, there was $28.6 million on the balance sheet under deferred gain on co-insurance transactions, which will be recognized in revenue over time.

As of December 31, 2021, it was $28 6 million on the balance sheet and a deferred gain until insurance transaction, which will be recognized in revenue over time.

Our invested asset base grew significantly to 976 million at the end of the year up from 518 million at the end of 2020.

Georgette Nichols: Our invested asset base grew significantly to $976 million at the end of the year, up from $518 million at the end of 2020.

Overall, we benefited from core capabilities developed of sorts of alternative assets in the areas of private credit commercial mortgages and structured products.

Georgette Nichols: Overall, we've benefited from core capabilities developed to source alternative assets in the areas of private credit, commercial mortgages, and structured products.

Georgette Nichols: Also, our strong and unique partnerships with asset managers allows us to source high-quality assets with attractive yields.

Also our strong and unique partnerships with asset manager allows us to source high quality assets with attractive yields.

Georgette Nichols: We provide non-GAAP measures collectively referred to as management metrics and have updated those in our earnings release in 10-K.

We provide non-GAAP measures collectively referred to as management metrics and is updated those in our earnings release and 10-K.

Georgette Nichols: And while these measures are not a substitute for our GAAP results, we believe that when used in conjunction with our GAAP results, the management metrics can help further understand the progress of the business.

And while these measures are not a substitute for our GAAP results. We believe that when used in conjunction with our GAAP results management metrics can help further understand the progress of the business.

During 2021, we achieved several important accomplishments.

Georgette Nichols: During 2021, we achieved several important accomplishments.

Georgette Nichols: We introduced a new multi-year guaranteed annuity product for registered investment advisors.

Produced a new multiyear guaranteed annuity product for registered investment advisors.

Georgette Nichols: Added two new index choices in our fiat products, one a multi-asset index from Goldman Sachs, the other an S&P 500 ESG index.

Added two new index choices in our <unk> product, one multi asset index from Goldman Sachs. The other an S&P 500 ESG index.

Georgette Nichols: We added two new independent marketing organizations to distribution and partnered with various institutional asset managers to provide alternative asset sourcing.

We added two new independent marketing organizations to distribution and partnering with various institutional asset managers to provide alternative asset sourcing.

Georgette Nichols: We also launched a new wholly-owned Seneca reinsurance sale to assume a portion of our 2021 retained business, and we added two new third-party reinsurance partners for a total of six now.

We also launched a new wholly owned Seneca reinsurance, though within a portion of our 2021 retained business and we added two new third party reinsurance partners for a total of six months.

Georgette Nichols: As we start 2022, we're building on those accomplishments and bringing our focus and activity to the key drivers of the business.

As we start 2022, we're building on those accomplishments and bringing our focus and activity to the key drivers of the business.

Georgette Nichols: Our opportunity remains strong, and our strategy is to capitalize on the growing market by distinguishing ourselves and providing annuity products to Americans who are saving for retirement.

Our opportunity remains strong and our strategy is to capitalize on the growing market I distinguishing ourselves in providing annuity products to Americans or saving for retirement.

Georgette Nichols: to create and use reinsurance structures, including our captive reinsurer, to mitigate risk and provide capital, for which demand and interest is strong from our partners.

And use reinsurance structures, including our captive reinsurer mitigate risk and provide capital for which demand and interest is strong from our partners.

Georgette Nichols: and to provide management services around investing assets for those reinsurance structures and leveraging core capabilities to support the administration of those vehicles, all of which generate.

And to provide management services around investing assets for those reinsurance structure and leveraging our core capabilities to support the administration of those vehicles.

All of which generate fee revenue.

Georgette Nichols: The result at Midwest is a capital light business model that we believe should produce higher returns for our shareholders over time compared to the traditional insurance company model of selling new policies and holding them on balance sheets.

The result that Midwest is a capital light business model, we believe should produce higher returns for our shareholders over time compared to the traditional insurance company model of selling new policies and holding them on balance sheet.

Georgette Nichols: We're providing guidance for 2022 around key metrics based on the current view of the market and the potential impact on Midwest, which could be modified at those conditions.

We're providing guidance for 2022 around key metrics based on the current view of the market and the potential impact on Midwest, which could be modified if those conditions change.

Georgette Nichols: While Midwest can be impacted by the market and movement in interest rates affecting the pricing and cost of annuity products, we believe we can manage this along with potential volatility.

While Midwest can be impacted by the market and movement in interest rates affecting the pricing and cost of annuity products. We believe we can manage this along with potential volatility.

Georgette Nichols: The recent and expected further increase in interest rates could be beneficial to our investment portfolio. But we're also mindful of the increase in volatility over recent months and the impact that could have on the hedging of equity market exposure on our FIIA products.

The recent unexpected further increase in interest rates could be beneficial to our investment portfolio, but we're also mindful of the increase in volatility over recent months and the impact that could have on the hedging of equity market exposure on our feed product.

Georgette Nichols: We have a program in place to mitigate this risk and we continue to evaluate it.

We have a program in place to mitigate this risk and we continue to evaluate it.

For annuity premiums written we saw a slow start in the first quarter of 2022 similar to our experience in the fourth quarter of last year.

Georgette Nichols: For annuity premiums written, we saw a slow start in the first quarter of 2022, similar to our experience in the fourth quarter of last year.

Georgette Nichols: We have approximately $83 million of premium written through today for the federal government.

We have approximately $83 million of premium written.

Through today for the first quarter.

We've taken pricing actions on both our fear in like a product in the quarter and continue to monitor our competitiveness in the market.

Georgette Nichols: We've taken pricing action on both our FEA and LIGA products in the quarter and continue to monitor our competitiveness in the market.

We've also increased our focus on marketing reestablishing and expanding our relationships on the distribution side theres various channels and reallocating, our adding resources relating to this initiative.

Georgette Nichols: We've also increased our focus on marketing, reestablishing and expanding our relationships on the distribution side through various channels, and reallocating or adding resources relating to this initiative. We're starting to see some encouraging trends as we end the first quarter of 2022.

Turning to see some encouraging trends as we end the first quarter of 2022.

We've also prioritized expanding our state footprint as quickly as possible to become licensed in states, where a significant number of retirees reside and where our <unk> are located.

Georgette Nichols: We've also prioritized expanding our state footprint as quickly as possible to become licensed in states where a significant number of retirees reside and where our IMOs are located.

Georgette Nichols: We're filing, responding, and providing increased information to regulators and discussing how the model ensures that policyholders are protected given the capital held and supported by using reinsurance structures.

We're filing responding and providing increased information deregulated and discussing how the model ensures our policyholders are protected given the Capitol Hill and supported by using reinsurance structures.

Georgette Nichols: Given these dynamics, we anticipate premiums written to be in the range of 500 to 600 million for 2022.

Given these dynamics, we anticipate premiums written to be in the range of $500 million to $600 million for 2022.

Georgette Nichols: We still expect the mix in product sales to be consistent with 2021.

Still expect the mix in product sales to be consistent with 2021.

All of this will be influenced by state expansion and the impact of efforts with distribution partners.

Georgette Nichols: All of this will be influenced by state expansion and the impact of efforts with distribution partners.

Georgette Nichols: Based on the potential premium growth, we currently have capacity in place to cover the capital needs of writing the new business through existing reinsurers that have the potential to grow, along with potential transactions in the pipeline anticipated to close in the year.

Based on the potential premium growth. We currently have capacity in place to cover the capital needs of writing the new business the existing reinsurers that have the potential to grow along with potential transactions in the pipeline anticipated to close in the year.

Georgette Nichols: The goal is to feed on average approximately 70 to 90 percent of premium in the year and generate seeded condition feeds from them.

The goal is to feed on average approximately 70% to 90% of premium in the year and generate ceded commission fees from them.

As we grow managing expenses continues to be an area of focus we saw an increase in 2021 as we accelerated some cost to develop potential opportunity along with adding employees advancing technology initiatives and continuing to build the foundation of Midwest.

Georgette Nichols: As we grow, managing expenses continues to be an area of focus. We saw an increase in 2021 as we accelerated some costs to develop potential opportunities, along with adding employees, advancing technology initiatives, and continuing to build the foundation of Midwest.

Georgette Nichols: We have and continue to take steps to restructure the organization, monitor costs closely, and invest in the areas that drive growth.

We have and continue to take steps to restructure the organization monitor costs closely and invest in the areas that drive growth.

Georgette Nichols: We anticipate general and administrative expenses on a management basis, a non-GAAP measure, to be approximately $27 to $28 million for the full year 2022.

We anticipate general and administrative expenses on a management basis, a non-GAAP measure to be approximately 2000 $7 million to $28 million for the full year 2022.

Georgette Nichols: As we move forward, I'm encouraged by the trends we're seeing around premium-written state expansion and the ability to manage costs.

As we move forward I'm encouraged by the trends, we're seeing around premium written state expansion and the ability to manage costs.

The focus of the team is on the key drivers of growth in the business premium state expansion reinsurance and investment management and building the operational Foundation.

Georgette Nichols: The focus of the team is on the key drivers of growth in the business, premium, state expansion, reinsurance and investment management, and building the operational foundation.

Georgette Nichols: Our opportunity is strong and the team at Midwest is committed to positioning the business for further growth over time.

Our opportunity is strong and the team that Midwest has committed to positioning the business for further growth over time.

I look forward to providing updates as we progress and with that I'll open it up for questions.

Georgette Nichols: I look forward to providing updates as we progress, and with that, I'll open it up for questions.

Thank you.

If you would like to ask a question. Please press star followed by one on your telephone keypad. If you change your mind. Please press star followed by Jay We're preparing to ask your questions. Please show your phone is on mute. It lately, we will post for amendment to allow questions to be registered.

Georgette Nichols: If you would like to ask a question, please press star followed by 1 on your telephone keypads. If you change your mind, please press star followed by 2. When preparing to ask your questions, please ensure your phone is unmuted locally. We will pause for a moment to allow questions to...

Our first question comes from John Barnidge from Piper Sandler. Please go ahead.

Speaker Change: Our first question comes from John Barnage from Piper Sandler. John , please go ahead.

John Barnage: Thank you. At the six reinsurance partnerships you have now, what's the target for reinsurance relationships exiting 22?

Thank you.

Yeah.

Reinsurance partnerships you have now what's the target for reinsurance relationships exiting 'twenty two.

Speaker Change: Yeah, thanks, John . I think, again, what we're looking at is a combination of growing the existing partners that we have in place. Some of them have been there for a period of time and have reached capacity. Others, right, have an opportunity to continue to grow. So, you know, I think as we look forward, it's really about, again, the growth of the premium and the combination of product, what the appetite is on those reinsurers, and potentially growing them. I think, you know, as we plan.

Yeah. Thanks, Jon I think again, what we're looking at is a combination of growing the existing partners that we have in place some of them have been there for a period of time and haven't.

Reached capacity others have an opportunity to continue to grow so I think as we look forward, it's really about again the growth of the premium and the combination of product.

What the appetite is on those reinsurers and potentially growing them I think you know.

As we.

Speaker Change: said in the kind of earnings release that we do have capacity for 2022 in place to cover what we anticipate riding between our existing reinsurers and a couple of transactions that are in the pipeline that we'd expect to close during the year and so as we move into next year it certainly will again be based off of some of the growth projections that we have and achieve this year.

So setting the kind of earnings release, but we do have capacity for 2022 are in place to cover what we anticipate writing.

Between our existing reinsurers and a couple of transactions that are in the pipeline that we would expect to close during the year and so as we move into next year. It certainly will again be based off of some of the growth projections that we have achieved this year.

Speaker Change: Great, and then another question, based on the guide on seeded premium,

Great and then another question based on the guide on the ceded premium.

Sales volume in G&A.

Speaker Change: We've got a good sense of the profitability metrics. Can you maybe walk us through how you see the earnings walk from an operating management view perspective as the year progresses?

We've got a good sense of Crawford.

The profitability metrics can you maybe walk us through how you see the earnings walk from an operating management perspective.

As the year progresses.

Speaker Change: Because I know a lot of it's dependent on premiums ceded in any given quarter.

Because I know a lot of its dependent on premium ceded in any given quarter.

Yeah, I think John as we think about the start of the year.

Speaker Change: Yeah, I think, Sean, as we think about the start of the year, you know, first quarter is experiencing a slow start compared on the premium on the top line.

First quarter is experiencing a slow start compare on the premium on the topline.

Speaker Change: see all the experience in fourth quarter, that trends continued into the first. You know, we've taken some action around pricing in the first.

So all the experience in fourth quarter that trend continued into the first we've taken some action around pricing in the first quarter and we're starting to see some shoots of that as we kind of close out.

Speaker Change: quarter and we're starting to see some shoots of that as we kind of close out.

Speaker Change: the first quarter, so we do think that the first half of the year will be kind of slower than the back. Certainly, part of it is state expansion also, we're working hard.

The first quarter. So we do think that the first half of the year.

I'll be kind of slower than the back certainly part of it is state expansion also we're working hard to really kind of focused in and grow our footprint.

Speaker Change: to really kind of focus and grow our footprint.

Speaker Change: spending a lot of time ensuring that we're getting the right information to regulators and to start filing in new states coming off of the year-end results.

Spending a lot of time, ensuring that we're getting the right information to regulators and to start filing in new states coming off of the yearend results.

Speaker Change: I think that kind of then leads into how we think about seeding the premium. You know, again, I think our goal is to see between

I think that kind of leads into how we think about seeding the premium.

Again, I think our goal is to see between.

Speaker Change: 70 and 90, I think we feel very confident on the 70. I think the in-between gives us flexibility to use Seneca Re, which is our captive reinsurer. It's kind of a warehouse vehicle to grow.

17, 90, I think we feel very confident on the 70 I think the.

And between gives us flexibility to use Seneca re which is our captive reinsurer is kind of a warehouse vehicle to grow.

Cells and grow books that we can then turn around and sell to reinsure in particular on the side. So I think what we're seeing is again the demand on the reinsurance side is strong we've got a nice pipeline, we've developed a number of relationships internally to grow existing ones, but also theres.

Speaker Change: cells and grow books that we can then turn around and sell to re-insure, in particular, you know, and the size. So I think what we're seeing is, again, the demand on the re-insurance side is

Speaker Change: strong. We've got a nice pipeline. We've developed a number of relationships internally to grow existing ones, but also there's a number of partners that are interested in participating. And so I think for us, it's about ensuring that, again, we've got the right mix of appetite and then the asset quality that we want to take and put into those reinsurers. So I think, again, that reinsurer that, again, as you know,

The number of partners that are interested in.

Participating in so I think for us it's about ensuring that again, we've got the right mix of appetite and then the asset quality that we wanted to take him to them today.

Reinsurance, so I think again.

That reinsure that again as you noted.

We don't always see the impact of that on the financials from a GAAP perspective, certainly gives us some flexibility around that ceding Commission.

Speaker Change: We don't always see the impact of that on the financials from a GAAP perspective, certainly gives us some flexibility around that seating commission.

Speaker Change: So I think that, you know, ends up then impacting how we think about the revenue stream of seeded premium, or seeding commission premium that we – or seeding commission that we receive off of the premiums and the earnings. I think, again, one thing to remember is we have $28.5 million sitting on the balance sheet, right, that we'll start to earn into revenue from premium that we've already seeded from a GAAP perspective, from a management perspective, right.

So I think that ends up then impacting how we think about the revenue stream of ceded premium are ceding Commission premium that we are ceding commission that we receive off of the premiums.

The earnings I think again, one thing to remember is we have $28 5 million sitting on the balance sheet right that will start to earn into revenue.

From premium that we've already ceded from a GAAP perspective from a management perspective right that.

Speaker Change: Any preeming off of that, any commission off of that would go into revenue. So, again, a pretty good revenue stream if you think about.

Any premium offer that ceded any commission off of that would go into revenue. So again, a pretty good revenue stream. If you think about.

Seneca reading that captive reinsurance.

Speaker Change: Seneca Re and that captive reinsurance, you know, the...

<unk>.

So that we sold to orix would've probably generated about $10 million to $12 million in ceding Commission.

Speaker Change: sell that we sold to Oryx would have probably generated about $10 to $12 million in feeded commission. So that, again, from a management perspective, would have...

So that again from a management perspective would have.

Speaker Change: been added to income. So as we think about that, we think that there's, again, a good path. It then comes from a revenue perspective. And I think you saw that in the quarter over quarter and year over year results. It then becomes about managing our expenses.

Been added to income so as we think about.

That we think that there's again a good path. It then comes from a revenue perspective, and I think you saw that in the quarter over quarter and year over year results. It then becomes about managing our expenses.

Speaker Change: And I think there we're very focused on making sure that the expense base is invested in what can grow the business.

And I think there were very focused on making sure that the expense base is invested in what can grow the business.

In particular around distribution, making sure that we're.

Speaker Change: in particular around distribution, making sure that we're

Speaker Change: getting the right support around marketing, that we're being a strong partner with our distribution partners and providing information and support and out from a product and a pricing perspective that we're being innovative around that as we move through the year. And then that we're, you know, also then building our foundation. So that expense base is important for us to continue to manage. You know, we did incur

Getting the right support around marketing that we're being a strong partner with our distribution partners and providing information and support in and out.

From a product and a pricing perspective that we're being innovative around that as we move through the year and then that where you know also been building our foundation. So that expense base is important for us to continue to manage we did incur.

Speaker Change: costs this year around transactions and some of the investment structures that we did, and state expansion and some of our technology initiatives that will continue, but we do need to manage them and make sure that we're investing them in the areas of business that drive growth.

This year around transactions and some of the investment structures that we did and state expansion in some of our technology initiatives that will continue and but we do need to manage them and make sure that we're investing them in the areas of business that drive growth.

Thank you Mike.

Speaker Change: Thank you. My last question, I'll requeue. What's your timeline for state expansion in either as of year end or as of the call? How many states have seen applications filed?

Last question and I'll re queue, what's your timeline for state expansion in either as of year end or as of the call. How many states have seen applications model. Thank you.

Yeah, So I think as you know.

Speaker Change: Yeah, so I think, you know, state expansion is one of those things that's taken a little bit longer than we would have anticipated. And partly, we started out with two states where it

Steady expansion is one of those things that's taken a little bit longer than we would've anticipated and partly.

We started out with two states where it.

Probably quite significant requests in addition to what.

Speaker Change: probably quite significant requests in addition to what we normally file across the NAIC. And so we started there and have made progress in those states. We don't have any kind of final results from there, but we've been spending quite a bit of time providing additional information, answering a lot of questions. I think what we're seeing is that...

Normally file across the NTIC and so we started there and have made progress and in those states are we don't have any kind of.

Final results from there, but we've been spending quite a bit of time, providing additional information answering a lot of questions I think what we're seeing Ah is that.

Speaker Change: A lot of it is looking at our historical footprint from a financial perspective, which is developing. Again, we've only got a few years, so a lot of focus on projections and the assumptions behind that.

A lot of it is looking at our historical footprint from a financial perspective, which is developing again, we've only got a few years. So a lot of focus on projections and the assumptions behind that I think there's also a lot of discussion and you've seen it in the market around.

Speaker Change: I think there's also a lot of discussion and you've seen it in the market around.

Speaker Change: The use of a model like ours that is capital light and uses reinsurance and not necessarily traditional reinsurance, right, but structures with asset managers backing those. And so what does that mean in ensuring, right, that there's an understanding of the quality of those assets in those structures and how we monitor and navigate.

The use of a model like ours that is capital light and end uses reinsurance and not necessarily traditional reinsurance right, but structures with asset managers backing those and so what does that mean in ensuring rights if theres an understanding of the quality of those assets in those structures and how we monitor and NAV.

Again, you know.

Speaker Change: you know, that. So spending a lot of time talking to.

That so spending a lot of time talking to.

Speaker Change: regulators and answering questions around that. So, you know, I think.

Regulators and answering questions around that so I think were filed in a few states and we're getting ready to file in a number of states as we come off of full year your earnings results.

Speaker Change: We're filed in a few states and we're getting ready to file in a number of states as we come off of full year year earnings results and update all of our projections for that.

And update all of our projections for that.

Thank you.

As a reminder to ask any further questions. Please press star followed by one on your telephone keypad.

Speaker Change: As a reminder, to ask any further questions, please press star followed by 1 on your telephone keypad.

We currently have no further questions in the key so I'll now hand back to Georgia <unk> remarks.

Speaker Change: Okay, we currently have no further questions in the queue, so I'll now hand back over to Georgette for any closing remarks.

Georgette: Just thank you, everyone, for joining us. We're happy to follow up and take any other questions or comments on calls with you and look forward to speaking with you. Thank you for joining us.

Thank you everyone for joining us we're happy to follow up and take any other questions or comments on calls with you and look forward to speaking with you. Thank you for joining us.

Georgette: This concludes today's call. Thank you for joining. You may now disconnect your line.

This concludes today's call. Thank you for joining you may now disconnect your lines.

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