Q3 2022 Essent Group Ltd Earnings Call

Please standby were about to begin.

Good morning, ladies and gentlemen, and welcome to the <unk> group's third quarter 2022 earnings conference call. At this time all participants are in a listen only mode and please be advised that this call is being recorded after the speakers' prepared remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star one on your telephone keypad.

And if he would like to withdraw your question Press Star one again and now I'd like to turn the call over to Phil Stefano Vice President Investor Relations. Please go ahead.

Thank you Bill good morning, everyone and welcome to our call. Joining me today are Mark <unk>, Chairman and CEO and David Weinstock Interim Chief Financial Officer also on hand for the Q&A portion of the call is Chris Curran President of Essent Guaranty.

Our press release, which contains <unk> financial results for the third quarter of 2022 was issued earlier today and is available on our website I think group Dot com.

Prior to getting started I would like to remind participants that today's discussions are being recorded and will include the use of forward looking statements. These statements are based on current expectations estimates projections and assumptions that are subject to the risks and uncertainties.

Which may cause actual results to differ materially for a discussion of these risks and uncertainties. Please review the cautionary language regarding forward looking statements in today's press release.

The risk factors included in our Form 10-K filed with the SEC on February 16th 2022.

And any other reports and registration statements filed with the SEC, which are also available on our website now let me turn the call over to Mark.

Thanks, Phil and good morning, everyone. Today, we released our quarterly financial results, which continue to reflect the strong operating performance of our business for the third quarter of 2022, we reported net income of $178 million as compared to $205 million a year ago on a diluted per share basis, we earned $1 <unk>.

<unk> six for the third quarter compared to $1 84, a year ago.

And our annualized return on average equity was 17%.

Our long term outlook for housing remains constructive despite near term headwinds sharply higher rates and elevated home price appreciation have pressured affordability, resulting in a slowdown of housing activity.

Housing inventory remains low at approximately three months, partially due to reductions in supply from the lock in effect of existing homeowners and low rate mortgages.

Also favorable demographic trends should continue to provide foundational support to housing demand.

As of September 30th our insurance in force was $223 billion.

A 7% increase compared to a year ago or three months annualized persistency on September 30th was 84% while the weighted average note rate of our book is approximately three 7%.

As a result, the rising rates should continue to translate to higher persistency for our in force portfolio, which remains well positioned from both an expected duration and embedded home equity perspective.

The credit quality of our insurance in force remained strong with a weighted average FICO of 746, and a weighted average original LTV of 92%.

While the strong labor market has bolstered credit performance forward results remain levered to unemployment trends.

In the third quarter, we closed our eighth Radnor re island transaction, obtaining $238 million of fully collateralized excess of loss reinsurance coverage on our niwa from October 2021 through July 2022.

This follows our quota share and excess of loss transactions placed earlier in the year covering 40% of our current year business with forward reinsurance protection.

As of September 30, approximately 98% of our portfolio is reinsured.

Our reinsurance entity Essent re continues to write profitable GSE business and support our MGA clients in response to the current environment Essent re is benefiting from increased reinsurance pricing, while moving up the structure to optimize returns.

As of September 30th third at third party annual run rate revenues are approximately $60 million, while our risk in force was $2 billion.

We remain pleased with <unk> performance and its contribution to the profitability of our franchise.

Cash and investments as of September 30th where nearly $5 billion.

And the investment yield for the third quarter of 2022 was two 7% up from 2% in 2021. The recent rise in rates is providing clear tailwind for our investment portfolio as yields in the third quarter on new money approximated 4%.

We continue to operate from a position of strength with $4 3 billion in GAAP equity access to $2 6 billion in excess of loss reinsurance and approximately $1 billion of available liquidity.

With a trailing 12 month operating cash flow of $608 million, our franchise remains well positioned from an earnings cash flow and balance sheet perspective on September 21, a M. Best affirmed the a financial strength rating of our insurance subsidiaries Essent Guaranty also has a financial strength.

Ratings of <unk> by Moody's and Triple B plus by S&P.

We continue to take a measured approach to capital and remain committed to managing for the long term.

Given our strong financial performance during the third quarter I am pleased to announce that our board has approved a <unk> <unk> per share increase in our dividend to <unk> 23.

We continue to believe that dividends are a meaningful demonstration of the confidence we have in the stability of our cash flow and the strength of our operating model now let me turn the call over to Dave.

Thanks, Mark and good morning, everyone. Let me review our results for the quarter and a little more detail.

For the third quarter, we earned $1 66 per diluted share compared to $2 16 last quarter and $1 84 in the third quarter a year ago.

Net premiums earned for the third quarter was $208 million and included $13 $7 million of premiums earned by Essent re on our third party business.

The net average premium rate for the U S mortgage insurance business in the third quarter was 35 basis points, a decrease of three basis points from the second quarter, driven primarily by higher reinsurance costs.

Net investment income increased $3 3 million or 11% in the third quarter of 2022 compared to last quarter due primarily to higher yields on new investments and floating rate securities resetting the higher rates.

Other income in the third quarter was $11 $4 million, which includes a $5 $2 million gain due to an increase in the fair value of embedded derivatives in certain of our third party reinsurance agreements.

This compares to $1 $6 million last quarter, which included a $5 5 million loss due to a decrease in the fair value of these embedded derivatives.

The provision for loss and loss adjustment expenses was $4 3 million in the third quarter of 2022.

Compared to a benefit of $76 2 million in the second quarter and a benefit of $7 5 million in the third quarter a year ago.

This quarter's provision reflects an increase in the average reserve per default based on the composition of the default inventory and the current economic environment.

Our reserve estimate on late stage delinquencies increased primarily due to continued low levels of foreclosure and claim activity.

As a reminder, the provision for losses in the second quarter included a benefit of $62 $9 million related to a change in estimate of the ultimate claim rate on defaults from the second and third quarter of 2020.

Our portfolio default rate was one 6% at September 30th effectively flat compared to the second quarter.

We expect that default rate will increase in the fourth quarter due to the traditional seasonality of defaults and the impact of Hurricane Ian.

Other underwriting and operating expenses in the third quarter were $42 $1 million relatively flat to the second quarter.

The expense ratio was 20% this quarter consistent with the second quarter of 2022, and a slight increase from 19% for the full year 2021.

We continue to estimate that other underwriting and operating expenses will be approximately $170 million for the full year 2022.

During the third quarter Essent group paid a cash dividend totaling $23 $5 million to shareholders.

As a reminder, <unk> has a credit facility with committed capacity of $825 million.

Borrowings under the credit facility accrue interest at a floating rate tied to a short term index <unk>.

As of September 30th we had $425 million of term loan outstanding with a weighted average interest rate of 439%.

From 292% at June 30th.

Our credit facility also has $400 million of Undrawn revolver capacity that provides an additional source of liquidity for the company.

At September 30, our debt to capital ratio was 9%.

During the quarter Essent guaranty paid a dividend of $60 million to its U S holding company.

The U S mortgage insurance companies can pay additional ordinary dividends of $243 million in 2022.

As of quarter end, the combined U S mortgage insurance business statutory capital was $3 1 billion.

With a risk to capital ratio of 10, one to one.

Note that statutory capital includes $2 billion of contingency reserves as of September 32022.

Over the last 12 months the U S mortgage insurance business has grown statutory capital by $212 million, while at the same time paying $407 million of dividends to our U S holding company.

Now, let me turn the call back over to Mark.

Thanks, Dave during the third quarter, our business continued to generate high quality earnings and robust returns for our balance sheet and liquidity remains strong.

We believe that our measured approach around excess capital is in the best long term interest of our franchise and stakeholders, providing us both offensive and defensive Optionality as a result, we remain confident in the strength of our buy manage and distribute operating model and the U S and is well positioned in supporting affordable and sustainable.

Homeownership now, let's get to your questions operator.

Thank you. Thank you again, ladies and gentlemen, any question simply press Star one and if you do find to your question has already been addressed you can't remove yourself from the queue by pressing star one again take our first question. This morning for a marked degrees at Barclays.

Yes. Thank you.

Mark could you just discuss kind of what youre doing around pricing here with some of the growing uncertainties in the market and what youre observing from competitors.

Sure I mean, I think it starts.

With the environment Mark.

As we said in the script, we're clearly levered.

Unemployment so it is a slowing economy.

As far as we're saying youre starting to see some weakness in.

In the lower end consumer, particularly driven by inflation versus unemployment and inflation is very difficult for the fed.

The unsecured borrower down kind of below 680, that's a renter.

A lot of that shelter inflation is hitting those guys hard obviously not with us, but it's certainly it's certainly something we have our eye on FHA delinquencies are up a bit and you're starting to see some defaults in the single family rental.

Delinquencies in the single family rental business some of the larger ones that we follow their average FICO is kind of in that $6 60 to $6 80. So again the environments. There youre not really seeing it in unemployment that's pretty much a lagging indicator, but you're starting to see other signs, particularly even around.

The technology sector, so because of that and also I think just at the capital markets.

Are a bit volatile we saw that with our eye on execution.

You're starting to see the property and casualty business harden, the pricing really hard and in that side of the business, which will probably draw.

<unk> from from the mortgage insurers. So when you have so the cost of reinsurance is going up too. So when you talk about cost of capital going up slowing economy.

Elevated HPA and probably mark more of a normalized.

Credit environment.

We're going to hold to 12% to 15%.

Longer term returns pricing just needs to come off its kind of simple math.

We are.

We do have some support with higher investment yields.

But our view pricing has to come up we kind of lagged the market in.

In the third and fourth quarter of last year, even in the first quarter of this year and we kind of said we're a proxy.

So the market, we thought the pricing had gotten a bit too low.

As far as we're concerned.

It's clearly has come up.

I think that was reflected in the second and third quarters, our share has gone up.

And we have raised pricing we raised it in the second quarter. We did a couple of additional raises in the third quarter and given where we are with share.

I wouldn't be surprised to see us raise it again in the fourth quarter. So I think when you kind of look at those base average premium rates I think at some point youre going to want to see a four handle on that longer term.

It's going to take a while to get to that because of where the pricing has been and.

The other the rest of the industry.

As clearly raising pricing, which I think is a good thing, but again, it's even when you get past. This mark I think you have to look at a normalized credit environment, where we historically have said 2% to 3%.

Claim rates and it's been obviously below 1%. So absent just all the other issues that we talked about what you are probably shorter term in nature.

In terms of the economy, but longer term and a 2% to 3% claim rates would argue for higher pricing and again to achieve those type of returns. If we don't have that pricing than the industry is going to it's going to be harder for the industry to maintain that 12% to 15% range.

Okay, that's really helpful and then.

Just turning to capital deployment.

You did raise the dividend but.

You've been pretty conservative I think that Youre premiers sufficiency ticked up a decent amount Q over Q can you just talk about how youre thinking about deploying excess capital in this environment.

Yes, I mean, I think again, we think the dividend we are deploying and returning it to shareholders in the form of dividend, but again I think when you see just where the environment is and we don't have a crystal ball Mark we don't really know where unemployment is going to go and what the impact is I think when you think about the pro cyclicality.

Nature of P. Myers, a probably argue used to be a little bit more conservative around.

Excess liquidity I mean, as we run through various stress amounts you want to make sure you're you're.

Bolster there so I think I think will take a measured approach to it as you've heard me say in the past and I think the next I don't know.

12, 18 months earnings call all going to be all about the balance sheet I really do I don't think its of outgrows our insurance in force pricing is clearly one aspect of it but I would say that's more of a defensive nature.

I think when again when this is all through I think a strong I think we're going to be in better shape and I think our shareholders will be in better shape for us to have this type of balance sheet and I think thats something we believed and it's a long game.

And the other part to think about our market is when you get into these environments. Sometimes those are the best times to invest so you have to think of it that way that's the offensive nature of it and when we look at investments.

Could be as simple as additional data strengthening.

Additional employees the foundation of the business in terms of our infrastructure it could be potentially in new businesses. Essent was born out of dislocation. So we're we've seen kind of the movie before and I think sometimes longer term you've heard me say this longer term for Sn I can't speak for <unk>.

Others in the business, but for Essent to continue to maintain its growth is going to have to find other sources of revenue I mean, the mortgage insurance industry is a fantastic industry, but its only so big so you have to keep that in mind and again the toughest times.

The balance sheet, and where theres stress are also sometimes the best times to invest so we just want to make sure that we're well balanced and we're not kind of caught short and not able to take advantage of those opportunities.

Okay makes sense, thanks for all the comments.

Thank you the next nine to 16 of Jpmorgan.

Thanks.

For taking my question and good morning.

I wanted to follow up a little bit Mark on your comments about pricing.

One of the things that.

We're thinking about is that.

There are some pretty significant differences.

Michael one is that obviously, we're sort of in slow motion watching what everybody perceives to an economic downturn.

Very specific views on certain geographies and certain things that are going to manifest.

So the industry has moved too much more granular dynamic pricing.

I'm curious if you are seeing because of those two dynamics greater disparity in terms of pricing dynamics than you've seen in the past.

Does that make it more difficult because you might see overall trends in terms of pricing moving up but pockets of risk that you like more.

Increasingly competitive.

We don't see any really discerning I mean, I think there is clearly we see differences.

Amongst the industry around Msas right certain certain players are picking msas that they don't like and they're kind of heavily emphasizing other msas that they do like.

I think we're a little bit there in the middle of the pack.

And again, we're more of a frequency game.

And our view is just to give you our top level view Rick in terms of HPA is we probably see it flattish for three to four years and again Thats part of the HPA rise really was driven by.

Excess demand right from kind of that COVID-19 excess demand on top of low rates on top of a shortage of supply. So it's kind of simple supply and demand.

So we think that flattens out it doesn't mean, there's not going to be pockets or certain areas that are overbuilt.

That we'll see declines that's certainly that's going to happen. There is no doubt that that's going to happen.

And you can price for some of that but at the end of the day you are not going to price your way out of that so I wouldn't get I don't know, we don't get sometimes it can be a little bit.

What is the old saying generally writer precisely wrong. So we have to be careful with the engine. So I think we have a broader perspective around the portfolio I think it's more around kind of the base.

<unk> versus picking and choosing on Msas I really think that that will be the driver of longer term.

Got it I actually have not heard that expression before but I like it and I appreciate the answer as well.

Thank you.

Well go next Matthew Doug Harter of credit Suisse.

Hi, This is John <unk> on for Doug.

Just looking at the provision for losses here in this quarter.

You can see the prior period reserve is down.

Quarter over quarter and versus peers I'm, just kind of curious is that conservatism on your part or is that just you've made the adjustment for the COVID-19 vintages that you need to just would like some.

More color around that.

Yes, I'll start and then Dave can add yes.

Yes, I do think I'm not sure about again, we don't really are familiar with what the competitors are doing there, but I think in terms of us.

<unk>, everyone, we really highlighted the COVID-19 quarter, second and third quarter and kind of frozen.

And then in the fourth quarter of 'twenty went back to our normalized.

Actuarial model. So a lot of the performance past that kind of ran through the model. So you saw a lot of pluses and minuses and then in the last two quarters is where we really adjusted for the Covid.

At a point, where I'm not sure we're quite done with it but we're pretty much done with it.

So I think thats it and then I think there was some.

Additional changes to the reserves around some of the later stage buckets and I'll, let Dave comment on yes, and John as we talked about in the script.

We are seeing.

Really not a return to normalcy for for closures and for claims so.

Foreclosure moratoriums kind of ended at the end of the first quarter and not surprisingly, we hadn't seen a lot of foreclosure activity in the second quarter, but we thought that might start picking up in the third quarter and really did not significantly change much from the second quarter.

Same thing really with claims activity. So we are.

As we said, we're seeing a kind of a buildup of some late stage delinquencies and so.

That along with what's happening in the environment with.

What youre seeing with interest rates and maybe how that may affect borrowers and their options.

Severely delinquent borrowers.

It just.

It was something where we felt that clearly risk is building on these later stage delinquencies and so that really drove an increase in the average reserve per default in the quarter. We still did have prior period prior year favorable development.

It was probably more muted than we've had in the prior quarters.

And some of Thats going to be some of the timing things I think that mark referred to.

Got it thank you very much for the color.

Thank you. We'll go next now too vast George H W.

Hi, This is actually Alex bond on for Bose. This is more of a modeling question, but I was wondering if you could break out.

What goes into that other income line item I know that you mentioned the change in the quarter was due to the change in fair value of the embedded derivatives.

But yes any color there on what else is included in that line item and then also what would be a good run rate for other income going forward.

Yes.

Yes. So other income is really a combination of a handful of things.

We do have are.

MGA business.

So where we are providing consulting services to other reinsurers and that goes in there.

We also are providing some services were still providing services to triad and our triad service fee goes in there.

There's a pie and then our contract underwriting business is also in there. So there's a handful of things in there.

<unk>.

No.

The thing Thats going to move that around a lot is really going to be there is embedded derivatives and so thats why you see it fluctuate and that's something that is really going to be based on what happens in in the market and really hard to predict so.

That's one of the reasons, we tried to give those numbers. So you guys can kind of get an.

Understanding why other incomes moving around and kind of.

Adjust for those variations.

But longer term I wouldn't expect there's not like a run rate for it again I think it's relatively.

MGA is probably the most I would say sustainable part of that income line and that actually that spikes in certain quarters because of some of them. We have some profit commissions and some of the earlier agreements that we structure that are kind of paying off in the next couple of years, but kind of <unk>.

Way in the outer years, and it's gone more from just straight fee for service.

Okay, Great. That's helpful. There I appreciate the color and then also just wondering if you guys could provide any guidance or outlook for operating expenses for next year.

Yes, probably a little early.

We generally give that guidance.

On our February call, so stay tuned there.

Okay, great. Thanks that makes sense and thanks for taking the questions.

Thank you the next <unk> of Bank of America.

Yes.

And Mr. <unk>. Your line is open if you do you have a question Sir.

Oh, sorry, sorry, as Amit good morning. Thank you for taking my questions I wanted to start by asking about Essent edge as we enter.

It looks like way and bring a tiny most economic volatility.

Unemployment rising consumer finances, becoming more stress I was curious about how that model is working and going to your comment about being generally light than precisely wrong are you finding yourselves needing to put any kind of qualitative overlays on top us look like so youll quantitative model would spit out or anything like that.

No I mean, I would say, there's two there's two components to it one.

It's really the frequency part of the model and that really is driven.

From a raw a soft credit pool and a lot of the variables that go into it. So it is a little bit more.

Our real time, and we believe more effective than FICO and it should be it's looking at more variables, it's particularly good as we move down the credit spectrum, because there's obviously more of a.

The discrepancy or diversion amongst really good credits versus not so good credit. So we like it from that aspect I think the overlay we have the technology around the HPA, but that is more of an overlay in terms of how we price to market. So keep in fact that again the edge is really a is a score so it is.

Spits out pretty much an expected claim rate and then as we always talk about unit economics, you kind of back solve for rate based on kind of return goals in terms of just pricing in general the other qualitative aspect could be you just expect a higher you know you have a higher discount rate. So we expect a higher return given given some of the uncertainty about it but we do.

<unk> think in this in this environment edge it should provide a little bit of an advantage on the margin.

Great and maybe just to follow up on that the advantage on the margin is that going to lead to in.

A little bit more stressed economic times does that lead to just better credit performance or is that also an opportunity to write more business in some of those bands where youre seeing the differentiated performance in some of your peers, maybe just because you have more confidence in your.

I think it depends right I mean, it depends on how the size of the market so that the market.

Historically below 700, hasnt been a very large market, which is both a blessing and a curse I would say if you don't have the technology, what's the industry really didn't with cards, it's probably more of a blessing hence.

The strong high FICO is that we have in our portfolios.

It's hard to to price that theres, so much volatility around your mean expected losses, when you get below 680, hence why youre hallmark capital, but it's certainly a risk here for a reason and it's not always priced.

Appropriately so I think when we talked about.

Have heard in the industry about FHFA has changed that has the potential to significantly open up that market R.

Our view is at the top of the houses it's FHA probably changes their premiums also so we have a bit of offsetting penalties. However, if that were to be an open market. I mean, you have to proceed with caution.

We do think edge can help pick and choose a little bit better than FICO, but it may actually be the opposite me here.

It keeps you away from those businesses. So you price it in a way.

Because because of the risky nature of it that you don't.

You don't do as much in that market and I have seen over time been in the business for a while.

When consumer lenders, whether it's mortgage finance companies autos credit cards, when they go below kind of $6 80, they tend to lead with their chin.

And then they get attracted by the price and don't have a true appreciation for the volatility at a loss and over an extended period of time you can go below 680, <unk> make a ton of money for a period of time, but in generally over over the course of it always catches up with you. So we're pretty cautious around that I think you pick.

And choose for your opportunities, but I certainly wouldn't look at it as a way I certainly wouldn't look at it as a growth opportunity, we like kind of where we are in the credit spectrum and the type of borrower we have now.

Thank you.

Thank you Luca now to Roland Mayer of RBC capital markets.

Hi, Good morning. This first one is a simple question is there any sort of interest rate cap on the revolving or the term loans I'm trying to understand how that might riser follow going forward.

Yes, there is no cap on it.

Tied to a short term index. So it's based on prevailing market rates.

So certainly we're sensitive to the rising rates there.

The Michigan to that Rolling is twofold, one it's not relatively.

It's not that big of a number and second is just the adjustable portion of our investment portfolio.

More than is probably triple the size if not more so it certainly makes up for.

It makes up for that.

Okay. Thank you and then last week I think the FHFA announced the FICO 10, <unk> would be.

It will be used in the future does that have any effect on how as an edge actually runs or for the year credit selection.

Hey, good morning, it's Chris as far as the announcement on the alternative credit scores I think from our perspective, certainly the timeline remains outstanding and as far as what the tonality of it will look like I think generally speaking we're comparable we work with data ongoing so from March.

Standpoint, as it relates to edge I think we're going to be pretty comparable in transitioning to.

To the alternative credit scores.

Okay perfect. Thank you for the answers.

Thank you. We'll go next month you are taking hold.

Yes.

Hey, Thanks, good morning, and thanks for taking my question.

Following up on the conversation around unemployment is there any sensitivity analysis that you can maybe share around the pmiers cushion is a reserves the incremental changes in unemployment or do you feel like there's just too much of a lagging indicator. There's other factors at the loan level that you can point to as a sensitivity and then how are we thinking about.

The new island transactions with cost with their current level.

Like how much flexibility do you think you have to tweak the structure.

The attachment and detachment point, there's just not that much flexibility there.

That's how we're thinking about that in general Thank you.

Sure.

No.

I'll take the.

The first one I think you can kind of look at Covid.

Eric I mean, we had 10% unemployment and defaults were 5% our pmiers excess at a time without the.

The haircut was still in pretty good shape I don't have the exact number off the top of my at the top of my head, but I would I would look at that I think and then there is a continuum. So you can kind of do.

Do the math and again, it's important to just point out the pro cyclicality nature.

The calculation so you have in general.

567.

Our capital for a performing loan and then it goes up to 55.

And when you Miss two or three payments so that gross required asset could jump up we get a nice deduction for the reinsurance, but again, if there is a potential.

Dislocation in the reinsurance market, which by the way we saw in Covid.

And you always expect we've been again around this business long long enough to know and to go and get staff. The capital market's gets going so you have to you have to think about core capital in that in that sense not that theyre going to go away not that we wouldn't be an active issuer, but you have to be you have to be prepared for that you have to be prepared that delinquencies go up to a certain amount.

Theres no haircut from the <unk> and you have adequate capital to support the insurance company because again, we look at the next downturn also as an opportunity to pay claims in a very fast and efficient manner, which I think longer term will only strengthen our reputation of the industry, both amongst our lenders and down in Washington and.

Those are the things yet so you have to think about those things.

And we have and Thats, probably again why were a little bit more conservative.

Around the balance sheet in terms of the I O N E.

We issued back in the fourth quarter of last year, we saw some tightening or some some higher higher cost to execute it clearly got worse. This year, we were an issue or another <unk> was an issuer I'm a big believer in diversified capital sources, So again <unk>.

<unk> is a form of capital Levered.

A levered capital, but still a form of capital.

And I think you want to play in all area. So we're pleased with our quota share programs. The <unk> programs with the reinsurers have gone well and we like islands. We think it's still early it's kind of early in the lifecycle of that part of the market and its almost nascent and it's only been around really in.

Size to last five plus years.

And it needs to be strengthened in terms of number of investors. So our team has done they did a great job. This year widening the investor base. It didn't really come to fruition, given where the market is and theres a lot of causes for that right. I mean, you have a two year treasury rate at 4%. So these type of investors have other alternatives.

Lives to put their capital in there is obviously volatility around the credit, which we see I mean, they see the same things we see in terms of kind of clouds on the horizon and I think they were victims of that Swift increase in rates. So these guys are buying the bonds in having a mark to market loss. The next day, so that that makes it.

Difficult it doesn't mean you want to.

We're still believers in it because it's again, it's another form it's in cash.

We like the market longer term again it.

Slight market share these things ebb.

And they flow and in terms of the structure. Yes, you can certainly you can tweak. It you can go you can take more first loss position you can tighten the bans I mean theres a lot of different things that you can do but I do think it's important for our industry <unk> to be a participant in longer term.

And again, if you just look at the execution to it hasnt been that great at our last two deals, but it's been excellent from the history and so if you average it out.

It's fine and I think longer term, it's going to be a good market. So and again I think it looks like in terms of the reinsurance market.

No.

Theres, obviously, that's you can't all that's not a bottomless pit of capital.

With the reinsurers and probably worse worsening when you think about just their alternatives right with the P&C with.

With a pricing hardening so much in our P&C market, even heard one of our competitors, saying, they're going to allocate more capital to that so and youre hearing that with others. So that just like I said earlier means less for the <unk>. So you just want to make sure you don't get stuck just on one execution and again financial services 101 diversified sources of capital.

That's really helpful. Thank you guys very much.

Thank you and it appears we have no further questions. This morning, I would like to turn the call back to our management team for any closing comments.

Okay, well, thanks, everyone for your participation and have a great weekend.

Yes.

Okay. Thank you very much again, ladies and gentlemen that will conclude the <unk> group third quarter 2022 earnings conference call, we'd like to thank you also much for joining us and wish you all a great remainder of your day Goodbye.

Please wait the conference will begin shortly.

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