Q1 2025 HCI Group Inc Earnings Call
Good afternoon, and welcome to HCI groups first quarter 2025 earnings call.
Ali: Good afternoon, and welcome to HCI Group's first quarter 2025 earnings. My name is Ali and I will be your conferencer. At this time, all participants will be in a listen-only mode. Before we begin today's call, I would like to remind everyone that this conference call is being recorded. and will be available for replay through June 7th, 2025, starting later today. The call has also been broadcast live via webcast.
Holly: My name is Holly and I will be your conference operator.
Holly: At this time, all participants will be in a listen only mode.
Holly: Before we begin today's call I would like to remind everyone that this conference call is being recorded and will be available for replay through June seven 2025, starting later today.
Holly: The call is also being broadcast live via webcast and available via webcast replay until May eight 2026 on the Investor information section of HCI group's website at Www Dot HCI group Dotcom.
Ali: Available via webcast replay until May 8th, 2020. on the investor information section of HCI Group's website at www.hcigroup.com.
Bill Broomall: I would now like to turn the call over to Bill Broomall, Investor Relations. Bill, please.
Speaker Change: I would now like to turn the call over to Bill Broomall Investor Relations Bill. Please proceed.
Speaker Change: Thank you and good afternoon, welcome to HCI groups first quarter 2025 earnings call.
Bill Broomall: Thank you and good afternoon. Welcome to HCI Group's first quarter 2025 earnings call. To access today's webcast, please visit the investor information section of our corporate website at www.hcigroup.com.
Speaker Change: To access today's webcast. Please visit the Investor information section of our corporate website at Www Dot HCI group Dotcom.
Bill Broomall: Before we begin, I would like to take the opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as anticipate, estimate, expect, intend, plan and project, and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have a material adverse effect on the company's business, financial conditions, and results of operation.
Speaker Change: Before we begin.
Speaker Change: We'd like to take the opportunity to remind our listeners that todays presentation and responses to questions may contain forward looking statements.
Speaker Change: Pursuant to the private Securities Litigation Reform Act of 1095 words, such as anticipate estimate.
Speaker Change: <unk> intend plan and project and other similar words and expressions are intended to signify forward looking statements.
Speaker Change: Forward looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties.
Speaker Change: Some of these risks and uncertainties uncertainties are identified in the Companys filings with the Securities and Exchange Commission.
Speaker Change: Should any risks or uncertainties develop into actual events. These developments could have material adverse effect on the companys business financial conditions and results of operations.
Bill Broomall: HCI Group disclaims all the obligations to update any forward-looking statement.
Speaker Change: <unk> group disclaims all the obligations to update any forward looking statements.
Karin Coleman: Now with that, I would like to turn the call over to Karin Coleman, Chief Operating Officer. Thank you, Bill, and welcome, everyone. HCI continues to demonstrate its ability to grow top-line revenue while enhancing bottom-line profitability. In the first quarter, we grew gross earned premiums by 17% over the same quarter last year. We improved the net combined ratio to 56% from 67% in the first quarter of 2024. And we reported pre-tax net income of just over $100 million and earnings of $5.35 per share.
Kevin Coleman: Now with that I would like to turn the call over to Kevin Coleman, Chief Operating Officer Karen.
Speaker Change: Thank you Bill and welcome everyone.
Speaker Change: <unk> continues to demonstrate its ability to grow topline revenue, while enhancing bottomline profitability in the first quarter. We grew gross earned premiums by 17% over the same quarter last year.
Speaker Change: We improved the net combined ratio to 56% from 67% in the first quarter of 2024.
Speaker Change: And we reported pretax net income of just over $100 million and earnings of $5 35 per share.
Speaker Change: In addition to these financial achievements, we had several other accomplishments in the quarter.
Karin Coleman: In addition to these financial achievements, we had several other accomplishments in the quarter. Tailrow Reciprocal Exchange, the second reciprocal established by HCI, commenced operations in February by assuming approximately 14,000 policies and $35 million of premium from citizens. We view Tailrow as an additional component of HCI's growth initiatives moving forward. During the quarter, HCI announced its plans to redeem its 4.75% convertible senior notes. We expect the notes will be fully converted in June of this year. This will reduce the debt on our balance sheet by approximately $172 million.
Speaker Change: Hill ROM reciprocal exchange the second reciprocal established by HCI commenced operations in February by assuming approximately 14000 policies and $35 million of premium from citizens, we view tail row as an additional component of hca's growth initiatives moving forward.
Speaker Change: During the quarter HCI announced its plans to redeem its $4, 75% convertible senior notes, we expect the notes will be fully converted June of this year.
Speaker Change: This will reduce the debt on our balance sheet by approximately $172 million.
Speaker Change: In the first quarter Greenleaf, our real estate division successfully entered into a new multi year lease agreement with Geico for an office campus consisting of 190000 square feet. As a result, we believe the total off balance sheet gain and our real estate portfolio is now approximately $85 million, which is.
Karin Coleman: In the first quarter, Greenleaf, our real estate division, successfully entered into a new multi-year lease agreement with GEICO for an office campus consisting of 190,000 square feet. As a result, we believe the total off-balance sheet gain in our real estate portfolio is now approximately $85 million, which is not reflected in our reported book values.
Speaker Change: Not reflected in our reported book value.
Speaker Change: Lastly, we've made substantial progress on the separation of <unk> from H C. I agree we will be speaking more about it later on this call we're off to a really good start in 2025 now I'll turn it over to Mark to provide more details on the financial results.
Karin Coleman: Lastly, we've made substantial progress on the separation of Exeo from HCI Group. We will be speaking more about it later on this call. We're off to a really good start in 2025.
Mark: Now I'll turn it over to Mark to provide more details on the financial results. Thanks, Karin. As Karin mentioned, pre-tax income for the quarter was just over $100 million and diluted earnings per share were $5.35. compared to $3.81 in the first quarter last year. These outstanding results reflect the continuing trends we've been discussing for a while now. A lower loss ratio, revenue that's growing faster than expected. Strengthening Values. One of the more impactful trends is the significant decline in the loss rate. The growth-loss ratio this quarter was less than 20%, down from 31% in the same quarter last year, reflecting continued low claims. Claim frequency was about the same as the fourth quarter last year, but was down more than 40% from the first quarter.
Mark: Thanks, Karen.
Mark: As Karen mentioned pre tax income for the quarter was just over $100 million.
Mark: Diluted earnings per share were $5 35, compared to $3 81 in the first quarter last year.
Mark: These outstanding results reflect the continuing trends we've been discussing for a while now a lower loss ratio revenue, that's growing faster than expenses and a strengthening balance sheet.
Mark: One of the more impactful trends is the significant decline in the loss ratio to go up the gross loss ratio. This quarter was less than 20% down from 31% in the same quarter last year, reflecting continued slow claim volume claim.
Mark: Claims frequency was about the same as the fourth quarter last year, but was down more than 40% from the first quarter of last year.
Mark: The low claim frequency is driven by legislative changes, favorable weather conditions, and the lull we sometimes see after a hurricane. The declining loss ratio is only part of the story. Because of the technology provided by Exeo, we've been able to generate significant operational leverage. As evidence of that, the combined ratio this quarter was only 56%. Revenue is growing, but expenses... We are, of course, getting a temporary benefit from the timing of the citizens. And the loss ratio this quarter is a little lower than expected. But even if we normalize for both of these, the adjusted combined ratio is still around 7%.
Mark: Claims frequency is driven by legislative changes favorable weather conditions and the lull, we sometimes see after a hurricane.
Mark: The declining loss ratio is only part of the story, though because of the technology provided by <unk>, we've been able to generate significant operational leverage as evidence of that the combined ratio. This quarter was only 56% revenue was growing but expenses or not.
Mark: We are of course, getting a temporary benefit from the timing of the citizens assumptions and the loss ratio. This quarter is a little lower than expected, but even if we normalize for both of these the adjusted combined ratio is still around 7%.
Mark: Now let's take a look at the balance sheet where we are also seeing significant continued Shareholder equity grew by almost $70 million during the quarter, and book value per share grew by more than $6. past 12 months, shareholder equity has grown by more than $125 million, and book value has grown by $10 per share, both of these in a period where we had 3-Hertz. The strengthening of the balance sheet should accelerate in the second quarter as we expect to complete the process of converting our convertible notes as Karin mentioned. By the end of the second quarter, we expect shareholder equity to be close to three quarters of a billion dollars, book value per share to be close to $60.
Mark: Now, let's take a look at the balance sheet, where we're also seeing significant continued strengthening.
Mark: Shareholder equity grew by almost $70 million during the quarter and book value per share grew by more than $6.
Mark: <unk> 12 months shareholder equity has grown by more than $125 million and book value has grown by $10 per share both of these in a period, where we had three hurricanes.
Mark: <unk> is a strengthening of the balance sheet should accelerate in the second quarter as we expect to complete the process of converting our convertible notes as Karen mentioned.
Mark: By the end of the second quarter, we expect shareholder equity to be close to three quarters of $1 billion.
Mark: Book value per share to be close to $60 and the debt to cap ratio to be well below 10%.
Mark: The debt-to-cop ratio to be well below. In terms of holding company liquidity, that also continues to grow, and it's just over 250,000.
Mark: In terms of holding company liquidity that also continues to grow and is just over $250 million.
Mark: We ended the first quarter.
Mark: In summary, this was another fantastic quarter. Revenue's up, the combined ratio is down, earnings are growing, and the balance sheet continues.
Karen: In summary, this was another fantastic quarter revenues up the combined ratio was down earnings are growing the balance sheet continues to strengthen and with that I'll hand, it back to Karen.
Mark: With that, I'll hand it back. Thanks, Mark.
Karen: Thanks, Mark as I mentioned earlier, we've made substantial progress on the separation of NGO from HCI group and as we move toward being a stand alone company I want to introduce two key executives to the call Kevin Mitchell, who will discuss the opportunity in front of NGO and Swiler Buchu, who will discuss <unk> financials with that also.
Karin Coleman: As I mentioned earlier, we've made substantial progress on the separation of Exeo from HCI Group.
Karin Coleman: And as we move Exeo toward being a standalone company, I want to introduce two key executives to the call, Kevin Mitchell, who will discuss the opportunity in front of Exeo, and Suela Buku, who will discuss Exeo's financials.
Kevin Mitchell: With that, I'll turn it over to Kevin. Thanks, Karin. As background, I'm currently president of Exeo, and I joined HCI Group in 2013. Exeo is, at its core, a technology company focused on developing solutions that help insurance clients reduce both their loss ratio and expense ratio. Our benchmark for success is turning premiums into profits for our clients. In insurance terms, we want to give our clients access to a technology platform that delivers better combined ratio. The power of our technology is best illustrated by the proven track record at HCI's insurance companies, which have delivered industry-leading results.
Speaker Change: Turn it over to Kevin.
Speaker Change: Thanks, Karen.
Speaker Change: As background I'm currently president of XL and I joined the HCI group in 2013 axial is at its core a technology company focused on developing solutions that help insurance clients reduce both their loss ratio and expense ratio.
Speaker Change: Benchmark for success is turning premiums into profits for our clients and insurance terms, we want to give our clients access to a technology platform that delivers a better combined ratios.
Speaker Change: The power of our technology is best illustrated by the proven track record at HCI as insurance companies, which have delivered industry leading results.
Kevin Mitchell: Xeo currently manages approximately $1.2 billion in premiums on its platform. Up to this point, premiums on Xeo's platform have been tied to HCI. But this is only a small fraction of the U.S. homeowner's insurance market. We see a massive opportunity to unleash our technology on the rest of the market that our technology does not currently touch. We want to replicate the success we've had working with HCI's insurance companies and bring those underwriting results to the rest of the industry.
Speaker Change: Axial currently manages approximately $1 2 billion in premiums on its platform.
Speaker Change: To this point premiums on X sales platform had been tied to HCI.
Speaker Change: This is only a small fraction of the U S homeowners insurance market.
Speaker Change: We see a massive opportunity to unleash our technology on the rest of the market that our technology does not currently touch.
Speaker Change: We want to replicate the success, we've had working with HCI as insurance companies and bring those underwriting results to the rest of the industry.
Speaker Change: By being a Standalone company it will create new opportunities to pursue our growth objectives by adding new customers, who can benefit from our technology platform.
Kevin Mitchell: By being a standalone company, it will create new opportunities to pursue our growth objectives by adding new customers who can benefit from our technology platform.
Suela Buku: Next, I want to turn the call over to Swela Bolku to introduce XCO's financials. Thanks, Kevin, and hello, everyone. As background, I'm currently Chief Financial Officer of Exeo and have been with HCI Group for nearly 14 years. I've been fortunate to be part of the team since the founding of Exeo in 2012. to build on Kevin's comments.
Speaker Change: Next I want to turn the call over to swell of boku introduce <unk> financials.
Speaker Change: Thanks, Kevin and Hello, everyone.
Speaker Change: Background I'm currently Chief financial Officer of <unk> and has been with ACI group for nearly 14 years I've been fortunate to be part of the team since the founding of <unk> in 2012.
Speaker Change: <unk> builds on Kevin's comments.
Suela Buku: As we pursue the next phase of growth at Exeo, we do so from a position of strength. Exeo already has attractive margins, is solidly profitable, and generates strong operating cash flows. For the first quarter, Exeo reported $62 million in revenue and $24 million in pre-tax income, assuming Exeo operated as a standalone entity.
Speaker Change: We pursue the next phase of growth at X. Yeah, we do so from a position of strength.
Speaker Change: <unk> already had attractive margins is solidly profitable and generates strong operating cash flows.
Speaker Change: For the first quarter ex yard reported $52 million in revenue and $24 million in pretax income.
Speaker Change: Human eggs you operated as a standalone entity.
Suela Buku: For those looking for further financial details, the Segment Information Disclosure in HCI's 10-Q filing, which is scheduled for publication tomorrow, offers a more detailed summary of Exeo's financial performance. This should also help establish a consistent baseline for understanding Exeo's financial profile going forward. Overall, the quarter reflects strong margins and solid performance for the business.
Speaker Change: For those looking for further financial details the segment information disclosure in ACI 10-Q filing which is scheduled for publication Tomorrow also is a more detailed summary of ex U S financial performance.
Speaker Change: This would also help establish a consistent baseline for understanding ex U S financial profile going forward.
Speaker Change: Overall, the quarter reflects strong margins and solid performance by the business.
Pareshbhai Patel: I'll now hand it over to Paresh. Thank you, Shreya. The key takeaways from the earlier comments are that HCI is in a strong and healthy financial position. and that Exeo meets all the criteria necessary to succeed as a standalone company. and the benefit of an axial separation has the potential to be very significant. As Kevin highlighted in his comments... Exxio can bring its proven technology to a broader part of the market. which would be otherwise difficult to do under the HCI umbrella.
Paresh: Now hand, it over to Paresh.
Paresh: Thank you Charlotte.
Paresh: The key takeaways from the earlier comments are that HCI is in a strong and healthy financial position.
Paresh: And that AGM meets all the criteria necessary to succeed as a Standalone company.
Paresh: And the benefit of an H <unk> separation has the potential to be very significant.
Speaker Change: As Kevin highlighted in his comments.
Speaker Change: You can bring it's proven technology to a broader part of the market, which are which would be otherwise difficult to do under the HCI umbrella.
Speaker Change: The only question left.
Pareshbhai Patel: The only question left. The only question left to answer is, how do we make Exeo a standalone company in a manner that inures to the benefit of the current HCI shells? We believe a spin-off of Exeo into a separate public company is the best path forward, and that is what we are focused on at this time. A spin-off transaction would be subject to a variety of conditions. including the filing and effectiveness of a Form 10 registration statement with the SEC. Transaction will be done by distributing shares of Exeo held by HCI Group on a tax-free basis to HCI shareholders.
Speaker Change: So really the only question left to answer is how do we make eggs your standalone company in a manner than yours to the benefit of the current hei shareholders.
Speaker Change: We believe a spinoff of eggs you into a separate public company is the best path forward and that is what we are focused on at this time.
Speaker Change: Our spinoff transaction would be subject to a variety of conditions.
Speaker Change: Including the filing and effectiveness of our form 10 registration statement with the SEC.
Speaker Change: The transaction will be done by distributing shares of eggs you held by HCI group on a tax free basis to hei shareholders.
Speaker Change: If we wanted to proceed with the spinoff we expect to complete the transaction by the end of this year.
Pareshbhai Patel: If we were to proceed with a spinoff, we expect to complete the transaction by the end of this year. HCI shareholders will benefit from both the continued performance of HCI and the unlocked future potential of Exxon.
Speaker Change: Hei shareholders will benefit from both the continued performance of HCI.
Speaker Change: And the unlock future potential of eggs.
Ali: With that, I'll turn it over for questions.
Speaker Change: With that I'll turn it over for questions operator, please provide instructions.
Operator: Operator, please provide instructions. Thank you.
Speaker Change: Thank you.
Operator: At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone key. The confirmation tone will indicate your line is in the question. You may press star 2 if you would like to remove your question.
Speaker Change: At this time, we will be conducting our question and answer session.
Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Information tone will indicate your line isn't the question Keith.
Speaker Change: You May press Star two if you would like to remove your question from the queue.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions. Thank you.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we pull for questions.
Speaker Change: Thank you.
Matt Carletti: Our first question is coming from Matt Carletti with Citizens Capital America. Hey, thanks. Good afternoon. Good afternoon, Matt. Good afternoon.
Speaker Change: Our first question is coming from Mascara lessee with citizens capital markets. Your line is life.
Mascara Lessee: Hey, Thanks, good afternoon.
Speaker Change: After a mild.
Speaker Change: Afternoon, Paresh, maybe I'll just follow on from your from your last comments there I don't know if this is a question for you or for Kevin, but could you just maybe give us a little more color on.
Matt Carletti: Paresh, maybe I'll just follow on from your last comments there, and I don't know if this is a question for you or for Kevin, but could you just maybe give us a little more color on, you know, the homeowner's market is a big market, and so if there's kind of particular areas of the market that you think Exeo is at least initially, you know, best suited to go after. And then secondly, whatever you can say on kind of reception from third parties or discussions with third parties, that might be kind of potential clients, you know, how that's gone or how that's going.
Speaker Change: You know the homeowners market is a big market and so if there is kind of particular areas of the market that you'd think egg Z O is at least initially your best suited to go after and then secondly, what whatever you can say on kind of reception from third parties or discussions with third parties that that might be kind of potential clients. You know how about how thats gone and how that's going.
Speaker Change: <unk>.
Pareshbhai Patel: Matt, it's Paresh. Yeah, in terms of the places we could do it, obviously. ExoTechnology has proven its mettle in Florida. It's also proven its mettle in lots of other states that some of our subsidiaries operate. So we know we can do homeowners insurance in lots of states and markets very well. We actually are also looking at potentially using the technology for the lines of business. We've been doing this with commercial residential already, and there are other affiliated lines that we're looking at currently as well. So there is a broad applicability of this technology across multiple geographies and multiple lines of business.
Speaker Change: Matt its paresh.
Speaker Change: Yeah.
Speaker Change: In terms of the places we could do it obviously.
Speaker Change: <unk> technology has proven its metal in Florida has also proven its metal in lots of other states that are some of our subsidiaries operate in.
Speaker Change: So we know we can do homeowners insurance and lots of states and markets very well.
Speaker Change: We actually are also looking at potentially using the technology for the lines of business.
Speaker Change: Been doing this with commercial residential already and there are other affiliated lines that we could we're looking at currently as well. So there is a.
Speaker Change: Rod applicability of this technology across multiple geographies and multiple lines of business. So that's the size of the opportunity we're looking at.
Pareshbhai Patel: So that's the size of the opportunity we're looking at. In terms of attracting new clients that are non-HCI, we are in early discussions and early conversations, but part of the whole thing with this was we have been doing this in a very your measured manner. First of all, prove the technology works beyond a shadow of doubt, which hopefully has been done at this point. Secondly, you have to make sure that HCI, that Exeo is capable of operating as a standalone company, which clearly with Swellers numbers, you can see that is the case. And thirdly, to do the separation, which we are now undertaking, and then the fourth item is to expand to new clients, etc.
Speaker Change: In terms of.
Speaker Change: Attracting new.
Speaker Change: New clients there are non HCI we.
Speaker Change: We are.
Speaker Change: Oh, the discussions early conversations, but part of the whole thing with this was.
Speaker Change: We have been doing this in a very.
Speaker Change: Yeah.
Speaker Change: Measured manner first of all prove the technology works beyond a shadow of doubt, which hopefully has been down at this point secondly, you have to make sure that hei NGO is capable of operating at a Standalone company, which clearly with soil as numbers as you can see is that is the case.
Speaker Change: And thirdly to do the separation, which we are now undertaking and then the fourth item is to expand to new clients et cetera. So we're doing this in a measured way, but the progress, we're making and I'm answering the question, but I would tell you I'm. So impressed by the exits him anyway.
Pareshbhai Patel: So we're doing this in a measured way, but the progress we're making, and I'm answering the question, but I will tell you, I'm so impressed by the exit team. Every time they've been handed a task, it has got done on time, and under budget and ahead of schedule. It's just phenomenal to watch.
Speaker Change: They've been handled the task. It is got done on time and under budget ahead of schedule. It just phenomenal to watch.
Kevin Mitchell: Kevin, do you want to add anything? Yeah, just to echo some of Paresh's comments, Matt, when we look at the market, the homeowner's market itself is big. It's over $150 billion, so massive opportunity. Right now, XCO operates in just a small segment of the market. So based on these results, we see large opportunities coming our way over time. It makes a lot of sense, thank you.
Kevin Coleman: Kevin you want add anything yeah, just to echo some of parishes comments, Matt when we look at the market. The homeowners market itself is big it's over 150 billion. So massive opportunity right now FCO operates in just a small segment of the market. So based on these results.
Speaker Change: We see.
Speaker Change: Large opportunities coming our way over time.
Speaker Change: That makes a lot of sense. Thank you.
Mark: Maybe just a couple follow-ups, separate topics. So I guess maybe for Mark, on the gross loss ratio, can you, you mentioned kind of the favorable weather, you know, help the quarter. Can you kind of, any way to quantify that kind of versus what was normal? And if we adjust for that, is that kind of the loss ratio you see for the foreseeable future? Obviously absent any wind activity or anything like that. Yeah, so yeah, the loss ratio this quarter was a little under 20%, which actually was pretty similar to what it was in the fourth quarter of last year when you adjust for Milton.
Speaker Change: Just a couple of follow ups, a separate topic, so I guess maybe for mark on.
Speaker Change: On the gross loss ratio can you you mentioned kind of the favorable weather.
Speaker Change: You know help the quarter can you kind of any way to quantify that kind of versus what was normal and if we adjust for that is that kind of the.
Speaker Change: The loss ratio you see for the foreseeable future, obviously absent any real wind activity or anything like that.
Speaker Change: Yeah, Yeah. So.
Speaker Change: So yes, the loss ratio this quarter was a little under 20%, which actually was pretty similar to what it was in the fourth quarter of last year.
Jeff Miller: Jeff Miller.
Mark: We sometimes get lower claims for, you know, four, five, six months after a hurricane. uh...
Jeff Miller: We sometimes get lower claims for.
Jeff Miller: No 456 months after after a hurricane.
Mark: that's why they're playing If you look at a more normalized kind of whether we'd expect loss ratio might be four, maybe five points higher. So when I had mentioned. which I think is a little bit more reflective of what's going on. Okay, that's very helpful.
Jeff Miller: That's weather claims.
Jeff Miller: If you look at a more normalized.
Jeff Miller: Kind of whether we would expect loss ratio might be or it may be five points higher so when I had mentioned.
Jeff Miller: Sort of normalizing to get to that 70% combined ratio I was thinking of a loss ratio of about 24, 25%, which I think is.
Jeff Miller: A little bit more reflective of where we're at.
Jeff Miller: Obviously, that's down together.
Jeff Miller: But I think that's about where we are now.
Jeff Miller: Okay.
Pareshbhai Patel: And then one last one. Again, I don't know if it's for Karin or Paresh, just, you know, June 1 renewals coming up. I know you haven't announced anything yet, but I'm sure you've had lots of meetings with your reinsurers and various markets. Any kind of takeaways or color you can provide on kind of expectations or Um, yeah, Matt, we're almost in the middle of negotiations and everything else as we, as we would expect to be at this time in the calendar. There's plenty of capacity out there. So it's the usual negotiation that goes on at this point, which is capacity, you know, capacity and price and terms. So it's a very orderly One could almost say a boring year in terms of placing reinsurance, yeah?
Jeff Miller: Helpful. And then one last one the gatto for visits or Karen or perish.
Jeff Miller: Just, you know, June 1 renewal is coming up. I know you haven't announced anything yet, but I'm sure you've had lots of meetings with your re-insurers in various markets. Any kind of takeaways or color you can provide on expectations or...
Um, yeah, Matt.
Jeff Miller: We're obviously in the middle of negotiations and everything else as we are.
Jeff Miller: as we would expect to be at this time in the calendar. There's plenty of capacity out there, so it's the usual negotiation that goes on at this point, which is capacity and price and terms.
Jeff Miller: On what could almost say boring year in terms of placing reassurance, yeah?
Matt Carletti: Boring is good in this case, so thank you very much for the color, I appreciate it.
Speaker Change: Yeah, boring is good in this case, so thank you very much for the color, I appreciate it.
Operator: As a reminder, ladies and gentlemen, if you have any questions or comments, please press star 1 on your telephone.
Speaker Change: Thank you. As a reminder, ladies and gentlemen, if you have any questions or comments, please press star one on your telephone keypad.
Mike Phillips: Our next question is coming from Mike Phillips with Oppenheimer. Thanks. Good afternoon. Maybe two other questions on the XCO news.
Speaker Change: Our next question is coming from Mike Phillips with Oppenheimer. Your line is life.
Mike Phillips: I guess, first, can you talk about, I guess, other options that you were considering besides the way you're going with the spinoff and kind of the pros and cons of those, and maybe, you know, why you're going with this one? I'm assuming it's because of the benefit, the tax-free benefit, but maybe you can talk about that, just different options. And then, also on XCO, are there advantages that the platform offers to potential partners? Are those advantages, more or less, depending on where the partners are admitted or not admitted? Sure, so in terms of other ways of doing this, I think everybody had always thought about maybe we could do an IPO and then sell off or distribute the shares or do something on those lines.
Mike Phillips: Thanks, good afternoon. Maybe two other questions on the exo news. I guess first, can you talk about other options that you were considering besides the way you're going with this
Mike Phillips: and kind of a pros and cons of those, and maybe while you're going with this one, I'm assuming it's because of the tax-free benefit, but maybe you can talk about that, just different options. And then, also on Exio, are there advantages that the platform offers?
Mike Phillips: to potential partners. Our other advantages, more or less, depend on where the partners are admitted or not admitted partners.
Mike Phillips: Sure. So in terms of other ways of doing this, I think everybody had always thought about maybe we could do an IPO and then sell off or distribute the shares or do something on those lines but those kinds of things.
Pareshbhai Patel: But those kinds of things. are things you would do if you were needed to raise capital in order for Exeo to be healthy as a standalone company. It's already so healthy that we don't need additional capital. So in that sense, it became, as you would expect us to do, being a public company, is what can we do to maximize the... benefit to our existing shareholders and that's what this is that led us to the spinoff is we can do it that way it maximizes the value creation for existing shareholders We have always, you know... always taking that into consideration in all of our actions, and this is no different.
Mike Phillips: are things you would do if you were needed to raise capital in order for to be healthier to stand on company.
Mike Phillips: It's already so healthy that it doesn't, we don't need additional capital for it [inaudible]
Mike Phillips: So, in that sense, it became, as you would expect us to do being a public company, what can we do to maximize the...
Mike Phillips: Benefit to our existing shareholders and that's what this has done, led us to the spinoff. As we can do it that way, it maximizes the value creation for existing shareholders. And we have always York.
Mike Phillips: Yeah.
Mike Phillips: Always taking that into consideration in all of our actions and this is no different, yeah?
Pareshbhai Patel: What was the second part of your question again? Yeah, the second part was just, I'm curious if the advantages, you know, XCO, you've talked about how it's not just homeowners, but it does stuff for condo and other lines of business already internally. But I was curious if the advantages that it offers to potential partners, are they different, more or less, for a partner that is a pure play emitted carrier and homeowners versus a non-emitted Who does that matter? No, it doesn't actually, because the way that technology works, and you know, it's in the plumbing of the It's trying to assemble a book of business to whichever kind of partner it is.
What was the second part of your question again?
Mike Phillips: Yeah, the second part was just, I'm curious if the advantages, you know, Axial, you've talked about how it's not just homeowners, but it does stuff for condo and other lines of business already internally. But I was curious if the advantages that it offers to potential partners, are they different, more or less?
Mike Phillips: for a partner that is, if you're a play, admitted carrier in homeowners versus a, not a
All the better.
Mike Phillips: No, it doesn't actually because the way the technology works and the plumbing of the thing.
Mike Phillips: It's trying to assemble a book of business to whichever kind of partner it is, so that is most optimized to the profit margins and distribution that they want. We just take all the heavy lifting out of doing that distribution.
Pareshbhai Patel: So that is most optimized to the profit margins and distribution that they want. Yeah. We just take all the heavy lifting out of doing that distribution. So, I better not make any difference, yeah? Okay. Thank you.
Mark: And asking, it seems like, you know, the growth potential in homeowners over the near term seems to be, if I had to guess, seems to be more on the ENF side. Maybe you disagree with that, but if so, it'd be nice to see that those benefits are equal to both sides. Can you talk just generally about how Florida property homeowner rates have moved in the past three months compared to what you were talking about last quarter in Florida? Yes, so I think the Florida raids... I don't think there's been much movement in the last three months or so.
Mike Phillips: In Florida.
Mike Phillips: Yes.
Mike Phillips: So I think the Florida rates.
Mike Phillips: I think theres been much movement in the last three months or so.
Mike Phillips: The other thing that's occurred I think theres been a couple of new entrants into the marketplace, but that is normal activity that you would expect.
Mark: The other thing that's occurred, I think there's been a couple of new entrants into the marketplace, but that is normal activity that you would expect in a healthy marketplace. The other thing, going back to your earlier comment, yeah, we can do this with ENS just as effectively as we can do it with admittable carries at this point, yeah? Okay, good. Thanks.
Mike Phillips: And a healthy marketplace.
Mike Phillips: Yeah.
Mike Phillips: The other.
Mike Phillips: Other thing going back to your earlier comment yeah. We can do this with E&S just as effectively as we can do with admitted carriers at this point yet.
Mike Phillips: Okay. Good.
Pareshbhai Patel: And then I guess lastly, just maybe thoughts on I guess the commercial market, how that relates to your core business and the condo business. I noticed the premium was down there, any thoughts on what drove those premiums down this quarter? And just more generally, what's the competitive market look like in the condo business? The condo business, commercial residential business, is a lot more competitive. You know, when we started CORE, nobody wanted to be near that business, but suddenly everybody seems to want to compete with CORE now that we've done it, which is fabulous. But, you know, we maintain our pricing discipline and everything will work itself out in due course, yeah?
Mike Phillips: And then I guess lastly, just maybe your thoughts on.
Mike Phillips: I guess the commercial market as it relates to two to your core business and the condo business I noticed the premium was down there any kind of any thoughts on what drove those premiums down this quarter and then just more generally what's the competitive market look like in the in the cargo business.
Mike Phillips: The condo business.
Mike Phillips: Commercial residential business is a lot more competitive.
Mike Phillips: When we started core.
Mike Phillips: Nobody wanted to be near that business, but suddenly everybody seems to want to compete with core now that we've done it which is a fabulous but.
Mike Phillips: We maintain our pricing discipline and everything will work itself out in due course here.
Speaker Change: Okay anything I mean is that competitive nature is that why that the core business was down this quarter.
Mark: Okay, anything? I mean, is that competitive nature? Is that why the core business was down this quarter? Hey. My name is Mark. Are you looking at the written premium number in the press release? Is that what you're referencing? Yeah, I don't have it in front of me, Mark, but yeah, I think so. Yeah, the one thing you just have to be careful of is – it's actually not down. The thing you have to be careful of is just the way that the assumptions work. So we did the assumption – we did a significant assumption the first quarter last year for core.
Speaker Change: Hey.
Mark: Mike It's mark.
Speaker Change: I know when you are looking at are you looking at the written premium number in the in the press release is that what you're referencing.
Mark: And in front of me Mark, but yes.
Mark: I think so.
Mark: Yes. The one thing you just have to be careful of.
Mark: Actually not down, but then you have to be careful of is okay.
Mark: The assumptions work. So we did the assumption was we did a significant assumption in the first quarter last year for core and so just the way that you account for the written premium that all got written in that one quarter. So when you look at Q end of Q1 and actually forget it's not down at all.
Mark: And so just the way that you account for the written premium, that all got written in that one quarter. So when you look at Q1 to Q1, it actually – Okay, yeah, sorry, I was looking at the 7 versus the 19. Okay. Thanks, Mark.
Mark: Okay, Yes, sorry, I was looking for seven years of the 19 okay.
Martin: Thanks, Martin Okay. That's it for now thank you great. Thanks, guys.
Mark: Okay, that's it for now. Thank you very much.
Mark: Thank you.
Mark Hughes: Our next question is coming from Mark Hughes with Truist. Yeah, thank you. Good afternoon. but a firm.
Mark Hughes: Our next question is coming from Mark Hughes with Truest Your line is life.
Mark Hughes: Yeah, Thank you and good afternoon.
Mark Hughes: Good afternoon.
Mark Hughes: Harish has your thought.
Pareshbhai Patel: Paresh, is your thought to spin off some of the shares but still be able to consolidate Exeo? How are you thinking about Very simply, we're talking about a total spend. total separation.
Mark Hughes: To spin off some of the shares but still be able to consolidate our NGO how are you thinking about that.
Mark Hughes:
Mark Hughes: Very simply we're talking about.
Mark Hughes: Total spin totaled.
Mark Hughes: Total separation.
Pareshbhai Patel: Yeah, so so Mark is Mark. Yeah, I mean, they'd be two separate public companies and would not be consolidating capital. Okay, very good.
Mark Hughes: Yeah, So mark as Mark.
Mark Hughes: I mean, it may be two separate public companies and would not be consolidated operations effective anymore.
Mark Hughes: Okay very good.
Mark: Mark, are there any reserve games in the quarter? So, I'm not sure, do you mean net reserves, did they change, is that what you mean? Yeah, I think any favorable development. Now, we have adverse. Yeah, there's no favorable development. There's no adverse development that 19 point, whatever it was, it's just a straight up number and actually net net reserves are actually up. talk about that most quarters net reserves go up a bit so they did again so we expensed 59 million but again we our actual incurred loss You had commented last quarter, I think, that your loss experience better than you expected.
Mark Hughes: Mark were there any reserve gains in the quarter.
Speaker Change: So I'm not sure you mean net reserves did they change that what you mean.
Mark Hughes: Any favorable development.
Mark Hughes: No we haven't.
Mark Hughes: Yeah, there's no favorable development there is no adverse development that 19 point whenever it was as did the straight up number and.
Mark Hughes: Actually net net reserves are actually up a little bit we talked about that while this quarter's net reserves go up with it. So they did again so we.
Mark Hughes: We expect 59 million, but again, we are actual incurred loss was less than that but no pvt.
Mark Hughes: Yeah.
Speaker Change: Then you had commented last quarter I think that the.
Speaker Change: He would work experience on the citizens assumptions.
Speaker Change: Had been better than you expected do you have an update on that.
Mark: Do you have an update on that? Yeah, I mean, it's it's pretty similar to The rest of the book, if you look at If you look at tip top and homeowner's choice combined like maybe a 15% difference in the loss ratio. It's very, it's very. and we had expected. I don't mean the difference between 25 and, you know what I mean, very small difference. and that was a little bit better.
Speaker Change: Yes.
Speaker Change: It's pretty similar to them.
Speaker Change: To the rest of the book if you look at.
Speaker Change: If you look at <unk>.
Speaker Change: Tip tap in homeowners choice.
Speaker Change: Combined.
Speaker Change: Theres like maybe yes.
Speaker Change: 15% difference in the loss ratio, it's very very small.
Speaker Change: We had expected.
Speaker Change: I don't mean that everything in 'twenty, five and you know what I mean, very small difference between the two.
Speaker Change: And that was a little bit better than we initially anticipated when we get into it I think that that's an encouraging sign.
Mark: I think that's an encouraging sign.
Speaker Change: Yeah.
Pareshbhai Patel: And Paresh, on rates, I think you said last quarter that... participated. rates would be steady. for the balance of 2025. with its good profitability and I guess what you observe across the wider industry. What's your current sense of... what the pricing might be like, what your rate filing might be like bound to this year and in the next. Yeah, Mark, I think as we, you know, one of the nuances of the business is that every, all the carriers on an annual basis file the rate indications and etc. with the department. So, just like the reinsurance thing, we're going through that process at this moment in time.
Speaker Change: Paresh on rates I think you said last quarter that you anticipated that.
Speaker Change: Rates would be steady.
Speaker Change: For the balance of 2025.
Speaker Change: With this good profitability and I guess, what you observe across the wider industry.
Speaker Change: What's your current sense of.
Speaker Change: What the pricing.
Speaker Change: Pricing might be like what's your rate filing might be like balance of this year and into next year.
Mark Hughes: Yeah Mark.
Mark Hughes: I think as we you know.
Mark Hughes: One of the nuances of the business is that every all the carriers.
Mark Hughes: On an annual basis.
Mark Hughes: Oh.
Speaker Change: Great indications et cetera, with the department. So just like the reinsurance thing we're going through that process at this moment in time.
Pareshbhai Patel: And at the end of it, there will be some, there could be some minor rate adjustments. you know, one of the variable that's about to come up obviously is reinsurance, which I don't think is going to be particularly significant because of all of those movements and the department had, you know, to make a rate adjustment. We have to do all the work, file it with the department. The department has to go through its processes, approve it. And at that point, we then start implementing it. So given where we are currently, there isn't anything that's imminent.
Mark Hughes: And at the end of it there'll be some.
Mark Hughes: There could be some minor rate adjustments.
Mark Hughes: And.
Mark Hughes: One of the variables thats about to come up obviously reinsurance, which I don't think it's going to be particularly significant because of all of those movements in the department.
Mark Hughes: To make our rate adjustment.
Mark Hughes: We have to do all the work filing with the Department. The Department has to go through its processes.
Mark Hughes: And at that point, we then start implementing it so given where we are currently.
Mark Hughes: Sure.
Mark Hughes: There isn't anything that's.
Mark Hughes: Imminent right there would always be rate changes adventure that will come through but there is nothing imminent at this moment in time.
Pareshbhai Patel: There will always be rate changes eventually that will come through. But there is nothing imminent at this moment in time.
Speaker Change: Yeah, and we wouldn't be doing the right.
Pareshbhai Patel: Yeah, and when we're doing that rate evaluation filing process. How far back do you go, which is to say how much You know, you've had some good quarters here lately, but how much weight goes into the filing process from those very recent quarters? I think, you know, if you were to do a rate filing today, and I'm not an accurate, so I may get this off by a little bit, but it would be at best reflecting results up to the end of 2024, yeah? because I think the way they do it is you've got to do the end of 2024 results measured at the end of Q1 2025 would be the most current way you could do it.
Speaker Change: Evaluation filing process, how far back to Hugo <unk>.
Speaker Change: Just to say how much.
Speaker Change: You've had some good quarters here lately, but how much weight.
Speaker Change: It goes into the filing process from those very recent quarters.
Speaker Change: Oh.
Speaker Change: I think you know if you.
Speaker Change: We want to do a rate filing today and I'm not an accurate. So I may get this off by a little bit, but it would be at best reflecting.
Speaker Change: The results up to the end of 2024.
Speaker Change: Okay.
Speaker Change: Because I think the way they do it as you go to do the end of 2024 results measure at the end of the end of Q1 2025 would be the most current way you could do it.
Speaker Change: So.
Pareshbhai Patel: It would reflect some of this stuff in there. But that also includes, at that point, Helene and Milton. So you should keep that in mind as well. But this is just, yeah, it's a mechanical thing that happens. So it'll work itself through and rates fluctuate slowly over. periods of time. whereas our results are said to be much more volatile based on cat activity, yeah? Yeah.
Speaker Change: It would reflect some of this stuff in there but.
Speaker Change: That also includes and at that point Halloween and Milton So you should keep that in mind as well.
Speaker Change: But this is just yeah.
Speaker Change: It's a mechanical thing that happens so.
Speaker Change: Work itself through.
Speaker Change: We have rates fluctuate.
Speaker Change: Slowly over.
Speaker Change: Periods of time.
Speaker Change: Whereas our results are tend to be much more volatile based on.
Speaker Change: Cat activity here.
Speaker Change: Yeah.
Pareshbhai Patel: But it's almost... When you think about the exos, they're Here's and the public market that you think. It looks like, or do you think it's... anybody you have in mind as kind of fits in the same niche, performs the same services.
Speaker Change: Almost all.
Speaker Change: When you think about the Ngos there.
Speaker Change: Peers in the public market that you think are.
Speaker Change: It looks like or do you think it's.
Speaker Change: Meaningfully different is there any.
Speaker Change: Okay anybody you have in mind as a kind of fits the same niche performance Hussein serves.
Speaker Change: Services.
Speaker Change: Okay.
Speaker Change: I'm not in the insurance space right, because I think the way.
Pareshbhai Patel: I'm not in the insurance space, right, because I think the way... And we get asked this question a lot, so bear with me a second while I walk everybody through this. What we're talking about, the difference between what Exeo does and the other people who provide policy admin systems, etc., is the difference between, let's say, Ford and Uber, right? Ford sells you a car, you put gas in it, you drive it from A to B. It's a wonderful device to get you from A to B. On the other hand, Uber gets you from A to B as well, and it doesn't involve any of the purchasing an automobile and any of that stuff.
Speaker Change: We get asked this question a lot so bear with me a second why walk everybody through this.
Speaker Change: What we're talking about the difference between what <unk> does and the <unk>.
Speaker Change: Other people who provide.
Speaker Change: Policy admin systems et cetera.
Speaker Change: Is is the difference between let's say Ford and Uber right forward sell you a car you put gas at Ed you drive it from a to B.
Speaker Change: Device to get you from a to B.
Speaker Change: On the other hand, Uber gets you from a to b as well.
Speaker Change: And it doesn't involve any of the purchasing an automobile any of that stuff is Uber is more of a solution forward is a transportation system. If you like yeah.
Pareshbhai Patel: Uber is more of a solution. Ford is a transportation system, if you like. So in the same sense... Exeo isn't a software system or anything else. It's more of a platform that solves a problem, provides a solution. So very different, and it has important distinctions from just buying a piece of software. You're buying a solution, not a piece of software. Does that help? It does, it does. Thank you very much. Thank you.
Speaker Change: So in the same sense.
Speaker Change: <unk> isn't a software.
Speaker Change: System or anything else, it's more of a platform that solves a problem. It provides a solution.
Speaker Change: So very different.
Speaker Change: <unk>.
Speaker Change: It has important distinctions from just buying a piece of software.
Speaker Change: You're buying a solution up.
Speaker Change: A piece of software.
Speaker Change: Does that help.
Speaker Change: Oh it does it does.
Speaker Change: Thank you very much I appreciate it.
Speaker Change: Yeah.
Speaker Change: Thank you once again, if you have any questions or comments. Please press star one on your telephone keypad.
Operator: Once again, if you have any questions or comments, please press star 1 on your telephone.
Casey Alexander: Our next question is coming from Casey Alexander with Compass Point. Yeah, hi, good afternoon. Thanks for taking my questions.
Speaker Change: Our next question is coming from Casey Alexander with Compass point Your line is live.
Casey Alexander: Yeah, Hi, good afternoon, Thanks for taking my questions I'm curious in relation to NGO.
Pareshbhai Patel: I'm curious in relation to Exeo, you know, the spinoff and making it fully independent from HCI, is that in part to resolve any conflict of interest when Exeo goes out to a customer they're not owned or a division of a potentially competing insurance company? Is that a part of the calculus for doing a spinoff a hundred percent spinoff?
Speaker Change: United the spinoff and making it fully independent from HCI is is that in part to.
Casey Alexander: Resolve any conflict of interest when <unk> goes out to our customers are not owned or a division of a potentially can come.
Casey Alexander: <unk> insurance company is that a part of the calculus for doing a spin off 100% spinoff.
Kevin Mitchell: Yeah, hey, Casey, this is Kevin 100%. From from our standpoint, that is going to be a, you know, lift a huge barrier and allow allow us to, to grow without, you know, any type of conflict. Yeah, that makes sense.
Kevin Coleman: Yeah, Hey, Casey this is Kevin Yeah, a 100%.
Speaker Change: From our standpoint that is going to be a lift a huge barrier.
Speaker Change: And allow them allow us to grow without you know any type of conflict.
Kevin Coleman: Yeah that makes sense, so Kevin would it be your anticipation that that.
Casey Alexander: Kevin, would it be your anticipation that customers would be buying sort of a prepackaged software solution or is everything kind of customized to each individual client? How much are you going to have to customize versus how much can you kind of prepackage?
Speaker Change: You know that customers would be buying sort of.
Speaker Change: Our pre packaged software solution or is everything kind of customized for each individual each individual client how much do you are you gonna have to customize versus how much can you kind of pre pack.
Speaker Change: AKC, it's parish so let me kind of give it a techie answer for you.
Pareshbhai Patel: Hey Casey, it's Paresh. So let me kind of give a techie answer for you. When you buy a Ford. You pick whether you want to buy a Ford or a GM or a Mercedes or a BMW, right? when you go with an Uber. You just pay for the ride. In the same sense, how EGGEO works is EGGEO collects a fee every time a policy is bowed and administered. If you don't bind a policy, there is no cost. So it's a very much a variable cost model, and it's a solution in that fashion. But when you do that at great volume.
Speaker Change: Uh huh.
Speaker Change: When you buy a Ford.
Speaker Change: You pick, which one they want to buy a ford or GM or Mercedes or BMW right.
Speaker Change: When you go with an Uber.
Speaker Change: Can you just pay for the right.
Speaker Change: In the same sense.
Speaker Change: <unk> works is.
Speaker Change: You collect a fee every time of policies bound and administered if.
Speaker Change: You don't bind a policy there is low cost so it's a very much a variable cost model and it's a solution in that fashion, but when you do that at great volume right.
Pareshbhai Patel: right, it suddenly becomes incredibly powerful and incredibly valuable.
Speaker Change: Alright, it suddenly becomes.
Speaker Change: And currently powerful an incredibly valuable you see other marketplaces of this nature, what do you think of Uber or lyft or if you were to think of.
Pareshbhai Patel: You see other marketplaces of this nature, whether you think of Uber or Lyft, or if you were to think of, you know, Amazon or Spotify or any of those kinds of distribution platforms. You're paying for by the transaction, but the transactions that I apologize, as the technology neophyte, it kind of rolls right over my head sometimes.
Speaker Change: Amazon Spotify or any of those kinds of distribution platforms.
Speaker Change: Paying for by the transaction, but the transaction data.
Speaker Change: Yeah Okay.
Speaker Change: Yes.
Speaker Change: Apologize as a technology D. If I did kind of rolls right over my head, sometimes the you mentioned your redeeming the four and three quarters convert.
Pareshbhai Patel: You mentioned you're redeeming the four and three quarters convert. Would it be your expectation that you'd be redeeming that with cash or settling it with share? Settling in, Chairs.
Speaker Change: It would be your expectation that you'd be resuming that with cash or or settling it with shares.
Speaker Change: Settling in shares.
Speaker Change: Settling in shares okay great.
Speaker Change: Alright.
Casey Alexander: All right, that's all I have right now. Thank you.
Speaker Change: That's all I have right now thank you.
Speaker Change: Thank you.
Speaker Change: Thank you at this time this concludes our question and answer session.
Ali: At this time, this concludes our question and answer session.
Pareshbhai Patel: I would now like to turn the call back over to Paresh Patel, who has a few closing remarks. On behalf of the entire management team, I would like to thank our shareholders, employees, agents, and most importantly, our policyholders for their continued support as we embark on the next phase of our growth. Thank you.
Speaker Change: I would like to turn the call back over to pressure Patel, who has a few closing remarks.
Speaker Change: Yeah.
Speaker Change: On behalf of the entire management team I would like to thank our shareholders employees agents and most importantly, our policyholders for their continued support as we embark on our next phase of our growth. Thank you.
Speaker Change: Thank you.
Ali: Ladies and gentlemen, this does conclude today's call. You may now disconnect and we thank you for your participation.
Speaker Change: Gentlemen, this does conclude today's call you may now disconnect and we thank you for your participation.