Q1 2024 Greenlight Capital Re Ltd Earnings Call
Operator: Thank you for joining the Greenlight Capital E LTD First Quarter 2024 earnings conference. At this time, all participants are in a listening-only mode.
Thank you for joining the Greenlight capital Rielle T D first quarter 'twenty 'twenty four earnings conference at this time all participants are in a listen only mode. A question answer session will follow the formal presentation.
Operator: They tend to want to acquire operator assistance. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to David Sigmon, Greenlight Re's General Counsel. You may begin. Thank you and good morning.
Operator: Pleasure trouble call over to David Stickney, Greenlight Res General Counsel you may begin.
David Sigmon: Thank you and good morning.
David Sigmon: I would like to remind you that this conference call is being recorded and will be available for replay following the conclusion of the event. An audio replay will also be available under the Investors section of the company's website at www.greenlightre.com. Joining us on the call today will be our Chief Executive Officer, Greg Richardson, Chairman of the Board, David Einhorn, and Chief Financial Officer, Faramarz Romer. On behalf of the company, I'd like to remind you that forward-looking statements may be made during this call and are intended to be covered by the safe harbor provisions of the federal securities laws. These forward-looking statements reflect the company's current expectations, estimates, and predictions about future results and are subject to risks and uncertainty. As a result, actual results may differ materially from those expressed or implied.
David Sigmon: I would like to remind you that this conference call is being recorded and will be available for replay. Following the conclusion would be that an audio replay will also be available under the investors section of the company's website at www Dot Greenlight re dot com.
David Sigmon: Joining us on the call today will be our Chief Executive Officer, Greg Richardson Chairman of the Board, David Einhorn, and Chief Financial Officer farmers rubber.
David Sigmon: On behalf of the company I'd like to remind you that forward looking statements may be made during this call and are intended to be covered by the safe Harbor provisions of the federal Securities laws. These forward looking statements reflect the company's current expectations estimates and predictions about future results and are subject.
David Sigmon: To risks and uncertainties as a result actual results may differ materially from those expressed or implied.
David Sigmon: For more information on the risks and other factors that may impact future performance investors should review the periodic reports filed by the company with the SEC from time to time.
David Sigmon: Additionally, management may refer to certain non-GAAP financial measures. The reconciliations to these measures can be found in the companys filings with the SEC, including the company's recently filed Form 10-Q for the quarter ended March 31st 2020 for.
David Sigmon: The company undertakes no obligation to publicly update or revise any forward looking statements with that it is now my pleasure to turn the call over to Greg.
David Sigmon: For more information on the risks and other factors that may impact future performance, investors should review the periodic reports that are filed by the company with the SEC from time to time. Additionally, management may refer to certain non-GAAP financial measures. The reconciliations to these measures can be found in the company's filings with the SEC, including the company's recently filed Form 10-Q for the quarter ended March 31st, 2021. However, the company undertakes no obligation to publicly update or revise any forward-looking statement. With that said, it is now my pleasure to turn the call over to Greg. Thanks, David. Good morning, everyone, and thank you for joining us.
Greg: Thanks, David.
Greg Richardson: Greenlight RE had a strong first quarter with gross written premium up 16.5% compared to the first quarter of 2023. We delivered net income of $27 million, which equates to 3.9% growth in fully diluted book value per share during the quarter, or 16.5% on an annualized basis. We reported a combined ratio of 98% for the quarter, our sixth consecutive quarter of underwriting profitability. Our underwriting results included a 10.1 million loss, net of recoveries and reinstatement premiums from the tragic collapse of the Francis Scott Keybridge in Baltimore.
Greg: Good morning, everyone and thank you for joining us today.
Greg Richardson: Greenlight re had a strong first quarter with gross written premium up 16, 5% compared to the first quarter of 2023.
Greg Richardson: We delivered net income of $27 million, which equates to three 9% growth in fully diluted book value per share during the quarter were 16, 5% on an annualized basis.
Greg Richardson: We reported a combined ratio of 98% for the quarter, our sixth consecutive quarter of underwriting profitability.
Greg Richardson: Our underwriting results includes a $10 1 million loss net of recoveries and reinstatement premiums from the tragic collapse of the Francis Scott Key bridge in Baltimore.
Greg Richardson: This equates to 6.3% combined ratio points for the quarter. Our exposure to this loss is predominantly driven by our specialty book, where we re-insure a number of students who provide cover to the international community. Based on an industry loss estimate of approximately $3 billion, we have assumed a full limit loss for this cover. Our net loss position benefits from excess of loss outwards reinsurance protection, with additional protection still available if the industry loss estimate deteriorates. Accordingly, we expect limited variability in our losses reserved from this event.
Greg Richardson: This equates to six 3% combined ratio points for the quarter.
Greg Richardson: Our exposure to this loss is predominantly driven by our specialty book, where we reinsure a number of students who provide covered to the international group.
Greg Richardson: Based on an industry loss estimate of approximately $3 billion, we have assumed a full limit loss to discover.
Greg Richardson: Our net loss position benefits from excess of loss outwards reinsurance protection with additional protection is still available if the industry loss estimate deteriorates.
Greg Richardson: Accordingly, we expect limited variability in our loss reserve from this event.
Greg Richardson: Our underwriting portfolio favors shorter-tail specialty classes, such as Marine, so a loss of this magnitude falls within our range of expectations, despite the Baltimore Bridge loss perhaps being the largest Marine loss in history. We were able to absorb it during the quarter while still delivering a small underwriting profit. Moreover, we expect the marine market rates to harden as a result of this significant event.
Greg Richardson: Our underwriting portfolio favors shorter tail specialty classes, such as marine so loss of this magnitude falls within our range of expectations. Despite the Baltimore bridge loss, perhaps being the largest marine loss in history.
Greg Richardson: Okay.
Greg Richardson: We were able to absorb it during the quarter, while still delivering a small underwriting profit.
Greg Richardson: Moreover, we expect the marine market rates too hard and as a result of this significant event.
Greg Richardson: The 16.5% growth in first quarter gross written premium was primarily driven by growth in our casualty and specialty books, as we took advantage of the strong rate environment. We were pleased to grow these classes of business in an environment where signings were competitive. During the first quarter, we non-renewed a homeowner's quarter share contract due to its exposure to U.S. convective storm risk. Excluding this contract, we also grew our property book during the quarter since we believe property cap pricing continues to be attractive. Moving to April 1, 2024 renewal season.
Greg Richardson: The 16, 5% growth in first quarter gross written premium was primarily primarily driven by growth in our casualty and specialty books as we took advantage of the strong rate environment.
Greg Richardson: We were pleased to grow these classes of business in an environment, where signings were competitive.
Greg Richardson: During the first quarter, we nonrenewed homeowners quota share contract due to its exposure to U S convective storm risk.
Greg Richardson: Excluding this contract. We also grew our property book during the quarter since we believe property cat pricing continues to be attractive.
Greg Richardson: Moving to April one 2020 for renewal season, we saw similar trends to January one renewals with some premium growth year on year.
Greg Richardson: We saw similar trends to January 1 renewals with some premium growth year on year. The rating environment is broadly flat to down a few points, but in general, market discipline remains strong. We will write a small Japanese property cat book at April 1, 2024.
Greg Richardson: The rating environment is broadly flat to down a few points, but in general market discipline remains strong.
Greg Richardson: Yeah.
Greg Richardson: We write a small Japanese property Cat book at April one 2024.
Greg Richardson: Consistent with overall market conditions, rates were very modestly down, but there was significant pressure on signing. The nearly 50% strengthening of the US dollar versus the yen since the beginning of 2021 no doubt affects the overall supply and demand balance for Japanese catastrophe reinsurance. A key personal focus has been to meet with our innovation portfolio. Our head of innovation, Brian O'Reilly, and I met with the leaders of a number of our portfolio companies during the quarter, having a chance to understand their unique value propositions and their potential for profitable growth.
Greg Richardson: Consistent with overall market conditions rates were very modestly down.
Greg Richardson: But there was significant pressure on signings.
Greg Richardson: With nearly 50% strengthening of the U S dollar versus the yen since the beginning of 2021, no doubt affects the overall supply demand balance for Japanese catastrophe reinsurance.
Greg Richardson: Okay.
Greg Richardson: A key personal focus has been to meet with our innovation portfolio companies.
Greg Richardson: Our head of innovations, Brian O'reilly and I met with the leaders of a number of our portfolio companies during the quarter, having a chance to understand their unique value propositions and their potential for profitable growth.
Greg Richardson: I'm impressed with the quality of these opportunities and the excellent work our team does in identifying, selecting, guiding, and nurturing these innovative new businesses. In our March call, I provided some initial impressions of Greenlight RE and noted that Greenlight RE is in good shape and has exciting prospects. I would like to reiterate that impression. Now, I'll turn the call over to David Einhorn.
Greg Richardson: I am impressed with the quality of these opportunities and the excellent work our team performs in identifying selecting guiding and nurturing these innovative new businesses.
Greg Richardson: Finally.
David Michael Einhorn: In our March call I provided some initial impressions of Greenlight re.
David Michael Einhorn: And noted that Greenlight re is in good shape and has exciting prospects I would like to reiterate that impression.
Greg Richardson: Now I'll turn the call over to David Einhorn.
David Michael Einhorn: Great. Thanks, Craig and good morning, everyone.
David Michael Einhorn: The Solace Glass Fund returned 5.2% in the first quarter. Our long portfolio added 4.4%. The short portfolio was flat, and macro added 1.8%. During the quarter, the S&P 500 index advanced 10.6%; the largest positive contributors were long investments in Greenberg Partners and tenant health care and Gold. The largest detractors were long positions in Consul Energy and Penn Entertainment and a single name short position.
David Michael Einhorn: The solid class fund returned five 2% in the first quarter, our long portfolio added four 4% the short portfolio was flat and macro added one 8%.
David Michael Einhorn: During the quarter, the S&P 500 index advanced 10, 6%.
David Michael Einhorn: The largest positive contributor for long investments in Green brick partners, and tenet healthcare and interest rate related position in gold.
David Michael Einhorn: <unk> detractors were long positions in Consol energy and pen entertainment and a single named short position.
David Michael Einhorn: Greenbrick Partners advanced 16% after the company announced strong fourth-quarter results. The company continues to perform well in its core markets and appears well positioned for another strong year in 2024. Tenant health care rose 39% benefiting from ongoing strength in health care utilization and the sale of additional hospitals at a premium multiple. Early in the quarter, we established a new macro position by selling December 24. So for the future, At the time, the market expected the Federal Reserve to cut short-term interest rates between six and seven times this year.
David Michael Einhorn: Green brick partners advanced 16% after the company announced strong fourth quarter results. The company continues to perform well as car markets and appears well positioned for another strong year in 2024.
David Michael Einhorn: Tenet healthcare rose, 39% benefiting from ongoing strength in health care utilization and the sale of additional hospitals at premium multiples.
David Michael Einhorn: Early in the quarter, we established a new macro position by selling December 24, sulfur futures at the time the market expected the federal reserve to cut short term interest rates between 6% and seven times. This year the position benefited as the market came around to argue IV ended the quarter with only about two to $3 25.
David Michael Einhorn: The position benefited as the market came around, to our view, by the end of the quarter, with only about two to three 25 basis point cuts priced in for 2024. We trimmed the position to take some profit. Gold is also a significant contributor as the price advanced more than 8% during the quarter. Consul Energy shares fell 17% due to moderately lower coal prices early in the quarter and the collapse of the Francis Scott Key Bridge in Baltimore Harbor later in the quarter. The bridge collapse will prevent Consul from exporting coal from its local terminal in the near term, but we do not believe this to have any long-term relevance for this investment.
David Michael Einhorn: Basis points.
David Michael Einhorn: Price in for 2024, we trimmed the position to take some profits.
David Michael Einhorn: Gold was also a significant contributor as the price advanced more than 8% during the quarter.
David Michael Einhorn: Consol energy shares fell 17% due to moderately lower coal pricing early in the quarter and the collapse of the Francis Scott Key bridge in Baltimore Harbor later in the quarter. The bridge collapse will prevent consult from exporting coal from its local terminal in the near term, but we do not believe this to have a long term relevance.
David Michael Einhorn: For this investment.
David Michael Einhorn: I will note this is the first time in many years where we saw risk aggregation on both sides of the balance sheet, which is a rare occurrence. On the other hand, Consul has insurance for the interruption and should be able to recoup much of its loss. We established a long position in Penn Entertainment, an operator of land-based casinos, and ESPN BAT, its new online gaming business. However, the shares declined 30% during the first quarter as the market appears to be concerned about the amount of marketing spend the company undertook to acquire customers while launching ESPN BAT.
David Michael Einhorn: I'll note. This is the first time in many years, where we saw risk aggregation on both sides of the balance sheet, which is a rare occurrence on the other hand console has insurance for the interruption and should be able to recoup much of its loss.
David Michael Einhorn: We established a long position in entertainment and operator of land based casinos and ESPN bet. Its new online gaming business. The shares declined 30% during the first quarter as the market appears to be concerned about the amount of marketing spend the company undertook to acquire customers while launching ESPN.
David Michael Einhorn: We believe the launch was successful, and the company acquired 1 million customers in less than two months and guided to profitability a year earlier than previous guidance. Last quarter, we referred to a new large, and David Smith. We are proud to present the new Solvay solution.
David Michael Einhorn: We believe the launch was successful and the company acquired 1 million customers in less than two months and guided to profitability a year earlier than previous guidance.
David Michael Einhorn: Last quarter, we referred to a new large position we were building in an undisclosed materials company, we unveiled disposition as Solvay, a Belgian chemicals company at an investment conference in early April after undergoing a corporate restructuring, which spun out of specialty chemicals Division as science call.
David Michael Einhorn: This is the first of its kind in the industry. The company was founded in 1997. The company was founded in 1997. We unveiled the position we were building at an undisclosed materials company. We unveiled this position as Solvay, a Belgian chemicals company, at an investment conference in early April. After undergoing a corporate restructuring, which spun out a specialty chemicals division as ScienceCo, the new Solvay's key products are soda ash and bicar, as well as peroxide, silica, fluorine, earth formulations, and solvents.
David Michael Einhorn: The new solve a key products, our soda ash and by car as well as peroxides silicone barring Earth formulations and solvents, we expect solvay to earn near seven euros per share in 2028, and we acquired our position for less than four times those earnings.
David Michael Einhorn: We expect Salve to earn near €7 per share in 2028, and we acquired our position for less than four times those earnings, all while the company plans to pay an annual dividend of nearly 10% per year on our investment. In addition to Penn and Salve, we had a productive quarter and found a number of other promising long investments. We established a new medium-sized long position in HP Inc. and a macro position to benefit from higher copper prices, as well as small long positions in Royven Sciences and the Class A shares of Liberty Gold Global.
David Michael Einhorn: While the company plans to pass an annual dividend of nearly 10% per year on our investment.
David Michael Einhorn: In addition to pen at Solvay, we had a productive quarter and had a number of other promising elong investments we established a medium.
David Michael Einhorn: Our new medium sized long position to HP, Inc, and a macro positioned to benefit from higher copper prices as well as a small long positions in <unk> sciences in the class a shares of Liberty Global.
David Michael Einhorn: The Solace Class portfolio returned 1% in April and has returned 6.2% year-to-date as of April 30th. Net exposure in the investment portfolio was approximately 40% at the end of April. Greg has now been with us for just over four months, and the management transition has been very smooth. He's a prolific manager and leader.
David Michael Einhorn: The solid class portfolio returned 1% in April and has returned six 2% year to date as of April 30.
David Michael Einhorn: Net exposure in the investment portfolio was approximately 40% at the end of April.
David Michael Einhorn: Greg has now been with us for just over four months.
David Michael Einhorn: And the management transition has been very smooth.
David Michael Einhorn: Prolific manager and leader and we just had a fantastic board meeting in Cayman, We have observed an energized team with a shared strategy and vision.
David Michael Einhorn: And we just had a fantastic board meeting in Cayman where I observed an energized team with a shared strategy and vision. Now I'd like to turn the call over to Farmerch to discuss the financial results. Thank you, David, and good morning everyone. During the first quarter of 2024, we generated earnings of $27.0 million, or $0.78 per diluted share, compared to $5.9 million, or $0.17 per diluted share, in Q1 2023. The underwriting book generated a 3.4 million profit after underwriting-related GNA expenses, which equates to a combined ratio of 98.0%.
David Michael Einhorn: Current period catastrophe losses accounted for $12.4 million, or 7.7 combined ratio points, mainly related to the Baltimore Bridge incident, as well as losses from satellite failures. As Greg stated, we have booked the bridge loss at the full limit of our share of the underlying international group cover. Adverse loss development in the quarter primarily related to 2023 events, including an oil platform fire, hurricane Otis, and U.S. convective storms, as well as reserve strengthening on a general liability program relating to the 2015 to 2017 years.
Farmerch: Now I'd like to turn the call over to farmers to discuss the financial results.
David Michael Einhorn: Thank you David and good morning, everyone.
David Michael Einhorn: During the first quarter of 2024, we generated earnings of $27.0 million or.
David Michael Einhorn: Our <unk> 78 per diluted share compared to $5 9 million or <unk> 17 per diluted share in Q1 2023.
David Michael Einhorn: The underwriting book generated a $3 4 million profit after underwriting related G&A expenses, which equates to a combined ratio of $98 zero percent.
David Michael Einhorn: Current period catastrophe losses accounted for $12 $4 million or seven seven combined ratio points.
David Michael Einhorn: Mainly related to the Baltimore bridge incident, as well as losses from satellite failures.
David Michael Einhorn: As Greg stated, we have booked a bridge loss at the full limit of our share of the underlying international group cover.
David Michael Einhorn: Adverse loss development in the quarter, primarily related to 2023 events, including an oil platform fire Hurricane Otis and U S convective storms as well as reserve strengthening on a general liability program relating to the 2015 to 2017 years.
David Michael Einhorn: The adverse development was partially offset by reserve releases on the <unk> 2021 year of account and matured specialty excess of loss contracts.
David Michael Einhorn: The adverse development was partially offset by reserve releases on the FAL 2021 year-of-account and matured specialty excessive loss contracts. While none of these individually were significant, we generally tend to lean into adverse information quicker and wait for more clarity on favorable developments.
David Michael Einhorn: While none of these individually were significant we generally tend to lean into adverse information quicker and wait for more clarity unfavorable developments.
Faramarz Romer: The net adverse development of $5.4 million accounted for 3.3 combined ratio points during the first quarter of 2024. The rest of the current Enforce book performed in line with our expectations. During the first quarter, our net premiums written increased by $18.8 million or 10.7% to $194.1 million compared to the same quarter in 2023. The growth was split between our casualty and specialty books while the property book offset some of the increased.
David Michael Einhorn: The net adverse development of $5 4 million accounted for three three combined ratio points during the first quarter of 2024.
Faramarz Romer: The rest of the current enforce book performed in line with our expectations.
Faramarz Romer: During the first quarter, our net premiums written increased by $18 8 million or 10, 7% to $194 1 million.
Faramarz Romer: Compared to the same quarter in 2023.
Faramarz Romer: The growth was split between our casualty and specialty books, while the property book offset some of the increases.
Faramarz Romer: The net premiums earned were $161.5 million, an increase of $18.9 million or 13.2% compared to the same quarter in 2023. Turning to our casualty book, net premiums written increased by $12.3 million or 14.1% during the first quarter, primarily related to multiline contracts, which are mostly composed of the Lloyds Syndicate business. The composite ratio for the casualty business improved to 91% in the first quarter, compared to 103.8% during the comparable period in 2023. Moving to our specialty book, net premiums written increased by $11.6 million, or 18.7%, during the first quarter, mainly within the Marine and other specialty clinics. Excuse me, within the Marine and other specialty classes.
Faramarz Romer: The net premiums earned were $161 5 million, an increase of $18 9 million or 13, 2% compared to the same quarter in 2023.
Faramarz Romer: Turning to our casualty book net premiums written increased by $12 3 million or 14, 1% during the first quarter, primarily related to multi line contracts, which is mostly composed of the Lloyd's syndicate business.
Faramarz Romer: The composite ratio for the casualty business improved to 91% in the first quarter compared to 103, 8% during the comparable period in 2023.
Faramarz Romer: Moving to our specialty book net premiums written increased by $11 6 million or 18, 7% during the first quarter, mainly within the marine and other specialty.
Faramarz Romer: Excuse me within the marine and other specialty classes.
Faramarz Romer: The composite ratio for the specialty business increased to 110.7% in the first quarter compared to 75.8% during the comparable period in 2023. While the Baltimore Bridge incident accounted for much of the increase, adverse developments related to the 2023 oil platform explosion also contributed to the higher composite ratio this quarter. Within a property book, net premiums written decreased by $5 million, or 19%, during the first quarter, driven primarily by a non-renewed homeowners contract that Greg mentioned earlier.
Faramarz Romer: The composite ratio for the specialty business increased to 110, 7% in the first quarter compared to 75, 8% during the comparable period in 2023.
Faramarz Romer: While the Baltimore Bridge incident accounted for much of the increase adverse development related to the 2023 oil platform explore explosion also contributed to the higher composite ratio this quarter.
Faramarz Romer: Within our property book net premiums written decreased by $5 million or 19% during the first quarter driven primarily by a non renewed homeowners contract that Greg mentioned earlier.
Faramarz Romer: Excluding this contract, our net premiums written for the property book increased by $3.8 million, or 22%. The composite ratio for the property book business was 71% for the first quarter, compared to 113% during the comparable period in 2023.
Faramarz Romer: Excluding this contract on net premiums written for the property book increased by $3 $8 million or 22%.
Faramarz Romer: The composite ratio for the property book business was 71% for the first quarter.
Faramarz Romer: <unk> to 113% during the comparable period in 2023.
Faramarz Romer: The improvement was partially driven by fewer U.S. convective storm losses that had impacted the homeowner's contract in the first quarter of 2023. Total general and administrative expenses increased by $0.8 million during the first quarter to $10.7 million, compared to $9.9 million in the first quarter of 2023. We have been successful in recruiting talented individuals across the organization as we grow in all three jurisdictions in which we operate. We reported total net investment income of $26.4 million during the first quarter of 2024, compared to $5.2 million in 2023.
Faramarz Romer: The improvement was partially driven by fewer U S convective storm losses.
Faramarz Romer: That had impacted the homeowners contract in the first quarter of 2023.
Faramarz Romer: Total general and administrative expenses increased by zero point $8 million during the first quarter to 10 7 million.
Faramarz Romer: <unk> to $9 9 million in the first quarter of 2023.
Faramarz Romer: We have been successful in recruiting talented individuals across the organization as we grow in all three jurisdictions in which we operate.
Faramarz Romer: We reported total net investment income of $26 $4 million during the first quarter of 2024 compared to $5 2 million in 2023.
Faramarz Romer: Our investment in the Solus Glass Fund reported a gain of $18.2 million, or 5.2%, while our innovation investments reported a small loss in the first quarter. We earned $8.6 million of interest income on our restricted cash and cash equivalents and on our funds deposited at Loyal. At the end of the first quarter, our fully diluted book value per share was $17.39, an increase of 3.9% from December 31st, 2023.
Faramarz Romer: Our investment in the solar glass fund reported a gain of $18 $2 million or five 2%, while our innovations investments reported a small loss in the first quarter.
Faramarz Romer: We earned $8 $6 million of interest income on our restricted cash and cash equivalents and on our funds deposited at Lloyds.
Faramarz Romer: At the end of the first quarter, our fully diluted book value per share was $17 39.
Faramarz Romer: An increase of three 9% from December 31 2023.
Faramarz Romer: Okay.
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Speaker Change: I will now hand, the call back to the operator to open it up for questions alright. Thank.
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