James River Group Holdings, Ltd. (NASDAQ:JRVR) Q4 2020 Earnings Conference Call February 26, 2021 8:00 AM ET

Company Participants

Kevin Copeland - Head, IR
Frank D'Orazio - CEO
Sarah Doran - CFO
Bob Myron - President & COO

Conference Call Participants

Matt Carletti - JMP
Mark Hughes - Truist
Randy Binner - B. Riley
Meyer Shields - KBW

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the James River Group Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Mr. Kevin Copeland, Head of Investor Relations. Thank you. Please go ahead.

Kevin Copeland

Thank you, Chelsie. Good morning, everyone, and welcome to the James River Group fourth quarter 2020 earnings conference call.

During the call, we will be making forward-looking statements. These statements are based on current beliefs, intentions, expectations and assumptions that are subject to various risks and uncertainties, which may cause actual results to differ materially.

For a discussion of such risks and uncertainties, please see the cautionary language regarding forward-looking statements in yesterday's earnings release and the Risk Factors section of our most recent Form 10-K, Form 10-Qs and other reports and filings we make with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements.

I will now turn the call over to Frank D'Orazio, Chief Executive Officer of James River Group.

Frank D'Orazio

Thank you for that introduction, Kevin. Good morning and welcome everyone on the call.

It's my pleasure to join you for the first time as the CEO of the James River Group. And I'm here today with our CFO, Sarah Doran, as well as our President and COO, Bob Myron.

Before I hand the call over to Sarah to cover our financial performance for the quarter, I'd like to share a few introductory remarks with you. My primary focus over the first three months of my tenure at James River has been to ensure that the company remains absolutely laser-focused on the market opportunity we have in front of us, strengthening our position as a best-in-class E&S carrier with an expanding fronting and fee income business and reprofiled casualty reinsurance capability.

To keep the resources and bandwidth of the organization focused on our prospects for the future, it's critical that we respond to emerging loss trends quickly making any necessary adjustments to our processes, or underwriting appetite, and ultimately our reserve strength to prevent creating any distraction to the company's mission.

As previously announced, during our fourth quarter, we strengthened our reserves by $75.8 million in our Commercial Auto runoff portfolio, and $24.7 million in our casualty reinsurance unit. In both instances, we saw emergence in the quarter, changed several assumptions, and acted immediately to bolster reserves, adding nearly 4% to our overall net reserve position for the Group. These charges ultimately drove our full-year combined ratio for 2020 to 105.6%. Our accident year combined ratio was a 77% for the quarter, and a 90.4% for the year. These data points cast our prospective business in a very attractive light and give further credence to our focus on the opportunities in front of us.

The Commercial Auto reserve increase primarily relates to the 2016 to 2018 years of the runoff portfolio, where we've responded to heightened reported losses this quarter. For some context, paid and reported losses on this book had trended down since putting the large commercial auto account into runoff a year-ago. The company started to see higher reported losses in the last two weeks of the third quarter and this trend continued and accelerated during the fourth quarter. We believe this trend reflects COVID driven delays as well as the year-end settlement season, possibly exacerbated by higher unemployment rates.

We also completed a detailed claims review of a large block of the runoff claims and increased case reserves meaningfully in the fourth quarter. We've continued to close claims rapidly on this portfolio, and have now closed almost 58% of the claims that were opened in January 2020 and are receiving very few new claims at this point.

Of our approximately $1.4 billion of total group-wide net reserves at quarter-end, approximately $300 million supports the runoff portfolio. It's worth noting that even after our fourth quarter charge, our E&S unit made an underwriting profit for the year, producing a 97.7% combined ratio and our Specialty Admitted segment reported a combined ratio of 92.7%.

Our overall corporate results are clearly disappointing and not consistent with the company's unwavering focus on underwriting profits. Our fourth quarter charge understates what was otherwise a year of significant accomplishment for the organization. I remain both enthusiastic about the positive fundamentals that underlie our ongoing business; and very bullish on our prospects for 2021.

Excluding the impact of our Commercial Auto runoff portfolio, the company grew by 26% in the fourth quarter over prior fourth quarter, and by 14.6% over prior-year to more than $1.25 billion in GWP with strong growth in both our E&S and Specialty Admitted segments, while driving margin expansion throughout the company, and benefiting from our 16th straight quarter of positive rate change. Over those 16 quarters, our compounded aggregated rate increase on core E&S renewable book has been 31.8%.

Our core E&S segment truly hit its stride in 2020, as positive indicators across all major metrics, including 38.9% GWP growth in the fourth quarter, and 29.5% growth for the year, as our submission count increased to 11% for 2020, and policy count rose 26% over year-end 2019. From a rate perspective, the segment experienced 13.7% positive rate change on the renewal portfolio.

We feel particularly optimistic about our ability to carry this momentum into 2021. Our early Q1 indicators point to a continuation of the buoyant 2020 rate environment as our January rate change was actually more significant than both Q4 and full-year 2020.

We also experienced GWP growth in the month of 37%, as our core combined ratio increased 26% over January of 2020. These metrics seem to signal that we remain in a market that E&S underwriters dream about.

I should also mention that these 2020 measures were achieved while enjoying a major reduction in claims frequency throughout the year, down on an exposure adjusted basis by 19.1% based on policy count or 29.3% based on earned premium. I should also note that our budget for 2021 assumes that these reduction in claims frequency are temporary, and will revert to normalcy over the course of the year.

I'm also pleased to announce that our Specially Admitted segment continues to gain scale as the unit onboarded eight new programs in 2020 ensuring further growth in GWP and fee income embedded in their 2021 plan, as these new programs gain traction over the course of the next year. They have a very robust pipeline of new and exciting opportunities for 2021, as we continue to see momentum in program submission activity, which increased 74% in 2020, while fee income increased 22% over 2019 to $19.3 million. We're seeing larger and more attractive opportunities in this space, as our Falls Lake unit makes a name for itself as a preferred fronting partner.

Of course, all this happened against the backdrop of a global pandemic, with the vast majority of our workforce working remotely. I'm very proud of the dedication and resiliency of the James River staff for their accomplishments and efforts despite unprecedented challenges to continue to position James River as a premier specialty E&S carrier.

Our plans for 2021 call for us to continue to profitably grow the company, renewing the commitment to our underwriting culture, while continuing to invest in our people, our processes, and our technology, in an effort to create a larger, more profitable specialty carrier, consistently producing top-tier returns. Our expectation for 2021 is to make an underwriting profit as a Group, and in each of our segments, as we aim to produce a low double-digit return on tangible equity for the year.

With that as an introduction, let me turn the call over to Sarah Doran.

Sarah Doran

Thanks Frank.

Let me highlight a few of the financial points from the quarter. Last night, we reported a net loss of $20.3 million for the quarter and net income of $4.8 million for the year, resulting in an operating return on tangible equity of 3.8% for the year. We had a $29 million operating loss for the quarter given the reserve charges and operating income of $21.2 million for the year. For the year, we grew tangible book value per share of 9% before dividend payments.

Our performance for the quarter reflects strong investment income performance and improved accident year loss ratios in our largest segment E&S, offset by reserve charges on our Commercial Auto runoff book and in our smallest segment Casualty Re. Market conditions remain extremely attractive for our business and we took advantage. We were reporting accelerating core E&S growth for this most recent quarter and almost 30% for the year. We continue to closely manage our expenses.

Frank covered the Commercial Auto reserves strengthening. But we also experienced $24.7 million of adverse development in our Casualty Reinsurance segment. This development was offset by $7.5 million of sliding scale commission adjustments that run through our expense ratio and those are on many of the treaties that performed adversely. Of the adverse development, approximately a third was on treaties that we no longer write, a few of our reinsurance contracts experienced much higher than expected loss emergence during the quarter, and in response, we adjusted our loss development factors. While some of these contracts remain profitable, this dynamic brought on the adverse development.

This quarter, we have $13.5 million with favorable development from our core E&S business emanating from the years 2019 and prior. We hold the most recent three years of our core E&S business at a loss ratio of 62.6%. And as Frank reviewed, we also reduced our current year loss pick in the core E&S book almost four points due to the 20% to 30% decrease in claims frequency we saw during 2020, along with the rate increases that he cited, which substantially exceeded our expectations.

Our paid and reported loss ratios in core E&S remained at or below 30% for 2020, a decrease in reported losses of 10 points from 2019 and 27 points from 2018. We're not counting on the low frequency trend to continue in future years, as Frank mentioned, as the COVID vaccine becomes more widely available and activity continues to increase. But we believe the reduction in claims frequency for 2020 will be permanent, and that we do not expect to catch-up as a result of delayed reporting. Examples of this would be fewer slip and fall accidents, fewer people in restaurants, fewer people going to work.

Our primary Federal Reserve study indicates that our reserves are strong and adequate, with a modest redundancy and strengthened from a year-ago.

For the full-year, core E&S made up approximately 65% of the company's net written premiums as compared to 40% for last year, it also makes up approximately 50% of our $1.4 billion of net reserves.

Moving on to expenses. Our expense ratio decreased to 19.9% this quarter, as compared to 34.2% in the first quarter of this year, and 26.7% for the full-year 2020. There were a few offsets to this year's expense ratio that we would not expect to repeat. First, the outset of sliding scale commissions and casualty re lowered the expense ratio by about two points for the year, and then reduced travel and other COVID-related savings, as well as a significant reduction in our performance-based compensation lowered the ratio an additional point. We do expect that our expense ratio in 2021 will be closer to 30%.

Finally, moving on to investments, net investment income for the fourth quarter accelerated as compared to prior recent quarters at $22.2 million, an increase from the same quarter last year, largely due to higher income from our renewable energy portfolio. One investment in this portfolio alone matured and exceeded performance targets. We do not expect this to regularly repeat and that the net investment income will be similar in quantum to the second and third quarter of 2020. This quarter our gross yield was about 3% or about 70 basis points reduced from the fourth quarter of 2019.

So with that, I'll hand it back to Frank.

Frank D'Orazio

Thank you, Sarah. Operator, would you kindly open the line to questions?

Question-and-Answer Session

Operator

[Operator Instructions].

Your first question comes from the line of Matt Carletti of JPM -- JMP.

Matt Carletti

Thanks, good morning. Frank, I appreciate your comments on the Uber reserve charge and the color that you were able to give around it. I guess, one question I wanted to ask you that I think is on a lot of investors' minds and potential investors minds is, what can you say or kind of what color can you provide if there's any additional color that your confidence level with you getting it behind you? Right, that it wasn't just a reaction to the data that actual was worse than expected and you reacted to it, but that there was also a very large dose of increased conservatism put into the process such that hopefully, we won't have to be revisited.

Frank D'Orazio

Thanks for the question, Matt. Let me try to walk you through kind of our thought process and how I feel about where we're right now. So, clearly we addressed loss emergence with a large number. We call for a claims audit by our senior claims leadership team to review a healthy sampling of the open files at time. And we boosted our case reserves on a portion of those files. Our actuaries took the data from the quarter and the insights from the claims audit and the indications were for materially higher ultimate losses that were now booked to.

I'm comfortable with where we ended the quarter, in particular, with the overall group reserve position, given the indications of our external reserve study, we're definitely better off today than we were a quarter-ago. So in Commercial Auto runoff to your question, case reserves per open claim are up about 150% year-over-year and up 25% since Q3. We've closed roughly 58% of the open claims, since we had at the beginning of 2020. And I feel our new actuarial in its election reflects the experience of the latest quarter as well as what we've learned in closing out the bulk of these claims. So I'm comfortable with the actions we've taken.

Now that being said, if there's an opportunity for us to further reduce any possibility of future emergence or tail risk, or to move to a higher-end of the range of outcomes, in a format that makes sense, economically viable, then we're open to exploring that option because I don't want a runoff book to be an ongoing distraction and drag in the organization. I want the full resource of the company completely focused on the opportunities in this market, continue to grow our Core E&S lines profitably, and scale our fronting business.

Matt Carletti

Great, thank you. And then just another question, really a two-part question. We just focus on Core E&S. The -- I guess, twofold question one is, as I think about top-line, I think we're just to confirm, we will be anniversarying kind of the apples to oranges of Uber being gone and that kind of the whether it's the Core E&S growth rate you quoted in for the quarter in the press release or talked about January kind of off to a good start that those sorts of numbers are what we should be thinking about in terms of that segment reporting? And then a loss ratio question in the sense of, as I look at kind of the 62 in change accident year, that 2020 ended-up at, is that a sustainable starting point, or should we be thinking about some of the commentary you had around some of the frequency benefit that took place in 2020 as being a part of that, and maybe not transferable to 2021 at least to start?

Frank D'Orazio

Okay. So there's a lot there, Matt. Let me start with the last part of your question --

Matt Carletti

I'm done with that.

Frank D'Orazio

Okay. Let me try to start with the last part of your question, which is just how to think about the 2021 accident year relative to a loss ratio pick. So listen, as I mentioned, we had significant reductions in claims frequency in 2020, along with rate increases in excess of expectations. So we're not assuming the same reduction in claims frequency for 2021. And we're taking a fairly conservative approach to our loss picks going forward. So hopefully that gives you some sense and color there.

And just relative to your question on the E&S market, and how to think about top-line and rate, I think that's where you're going on that. Look I would tell you, I think our thesis for the rate environment for 2021, if you asked me this a month ago, I would tell you that I thought it was a continuation of some blend of what we saw in Q3 and Q4 maybe with some moderation by the backend of the year. But our January report on rate was much higher, not just in Q4, but our year-end 2020. So that tells me we're seeing a lot of opportunities in lines of business like Excess Casualty, Excess Property, Allied Health, maybe some professional lines, where rates we're seeing there are higher than the lines of business that saw -- I'm sorry, are higher there than the composite average that we have in the overall portfolio. So we'll continue to monitor those business mix dynamics over the course of the year.

But we still think this market has legs between the live size limitations that we're witnessing in the market, the retrenchment of the standard market across a number of classes, the Lloyd's Decile Review and limitation on stamp size growth. And certainly, the continued overhang of recent accident years. We would be pleased with our regional thesis just relative to where we think growth can be and where rates will play out over 2021. But we have some reason for some additional optimism.

Operator

Your next question comes from the line of Mark Hughes with Truist.

Mark Hughes

Yes. Thank you. Good morning.

Frank D'Orazio

Good morning.

Mark Hughes

Were you giving some numbers near the back-end of your comments, you talked about the decline in reported either claims or losses for 2019. I think this was in the Core E&S business. Could you refresh me on that number if I'm -- if I'm clear enough?

Sarah Doran

Sure. Happy to. Thanks, Mark. So I was just reviewing paid and reported loss ratios in Core E&S because I think it's a pretty strong story there. And just to say that, core paid and reported loss ratios in Core E&S were at or below 30% for all of 2020, and that reflects a decrease of 10 points from where we were in 2019 and a decrease of 27 points from where we were in 2018.

Mark Hughes

Thank you for that. And then, Frank, when you look at the Casualty Reinsurance business, I wonder, if you might talk about where which sort of treaties if there's any commonality, any particular lines where you saw the loss emergence? And then how do you think that business is positioned on a go-forward basis? What are your competitive advantages? What do you bring to the market to give us confidence in the future profitability and returns in that business?

Frank D'Orazio

Sure. So let me try to address your questions on the development first. So in Casualty Re, roughly a third of the development that we saw comes from treaties that were no longer on. So we saw development on treaties from 2012 to 2018. But most of the charge was really from the 2016 and 2017 years. The lines of business that saw the most development were TL for contractors and commercial auto liability.

We ended-up changing our loss development factors on a few of our larger historical treaties, some we still write, some are no longer on. But the books been pared back in recent years. So significant reductions or eliminations of some volatile elements, non-standard auto, workers compensation, any property exposure. So roughly one-third of the emergence came from treaties that we no longer support. And hopefully, that gives you some sense in terms of where we're seeing it from.

But ultimately, we chose to take a more significant charge in the actuarial recommendation that the 24.7, the largest quarterly charge the unit has ever taken. So I feel very good about the steps we took there. And I feel even better about the likelihood of making an underwriting profit in the recent and current accident years, just based on the reprofiling of that book. The improvements made at the transactional level, relative terms and conditions, and then just the underlying lift in terms of rate, and improvements in the underlying business.

Mark Hughes

So that's some color there. Just --

Frank D'Orazio

I'm sorry, go ahead.

Mark Hughes

Yes, I didn't mean to cut you off, but I was going to ask you definitely been very optimistic about the growth outlook in the Core E&S. What should we think about the Casualty Re book, are you trying to grow that hold steady?

Frank D'Orazio

Yes, so good question. I would say we've been more focused on margin expansion there than growth. I would expect to see maybe some modest growth. But from a strategic standpoint, listen, we like the efficiencies Bermuda has historically provided us having the footprint that we do in the States, I like having positioned the Bermuda market, I think it's got the ability to round out distribution and market access opportunities for us. And I spent 12 years in the Bermuda market. So I think I know that market well. And I'll continue to explore ways to see if we can optimize the results there further over time.

Mark Hughes

And then, Sarah, I've asked you this before the ceded premium ratio within the Core E&S, any directional thoughts on that? I think you described that the Excess Casualty and Excess Property were some lines that you saw performing quite well, it sounds like you're growing there. How should the ceded premium ratio trend in the Core?

Sarah Doran

Yes, that's a great question, Mark. Thank you for asking in. Excess Casualty is really what drives that that was about a third of our premium in Core E&S this year. So that's what brought that ceded ratio down to its kind of current level. And that's the book in throughout all of Core E&S was growing the fastest, it really has the most consistent and best rate environment. So all that would roll-up to say that, I don't have a specific crystal ball on which line is going to grow when, but that one still certainly has a significant lag. So I would feel pretty comfortable with that ceded ratio in Core E&S we'll expand, this quarter is pretty similar to last quarter as well and think about that, moving forward as well.

I think we could, as the year goes on, as we're thinking about different things, there are always different levers to consider here. We certainly buy a fair amount of external reinsurance, but that books have been very profitable, that could be something that we'd look about ways to manage our capital going forward as well. So just to kind of give you a sense of other things that we're thinking about moving the dial and taking advantage of this market right now. But we're just looking for a pure kind of modeling question and assumption, I think the current rate is a fair enough one for where we sit current ceded ratio.

Operator

Your next question comes from the line of Randy Binner with B. Riley.

Randy Binner

Good morning. Thanks. I just wanted to ask on the Commercial Auto reserve charge, could you lay out and I was looking around, I don't think the 10-K is out yet. So a number that would be helpful to have is kind of what the -- where the incurred net losses on a GAAP basis for 2020 now, but if you don't have that, then kind of what accident years the adverse development was in, so we can kind of understand how each accident year is developing?

Bob Myron

Hey, Randy.

Frank D'Orazio

Yes, Bob do you want to help us?

Bob Myron

Yes, Randy, let me answer that question. So I've got full-year data here with me. During the calendar year 2020, we added reserves for 2016, 2017 and 2018 of $11 million, $47 million and $53 million respectively. I think, I would want to mention again that as Frank did, that we've made a significant amount of progress here closing claims and we've as of relative to the peak that we had, we've closed 58% of what was outstanding in January 2020. The remaining 80% of -- sorry above 80% of what's remaining open are from the accident years 2018 and 2019.

You'll remember that there's a lot of moving pieces to this Commercial Auto book, especially that both rate and state mix change consistently throughout the six years where the large commercial account wasn't meaningful for us. We got material rate increases in 2018, the 2018 underwriting year that continued into the 2019 renewal as we got increased rate also are the number of states that we ensured shrunk, and some of the more problematic states went away that had longer statutes of limitations and significant UMUIM type of exposure like Florida, which wasn't in the portfolio in 2018 or 2019.

The state mix also, as I mentioned, shifted a lot and the performance of the book change was the reduction to the state -- in the states as well. So I think that we continue to get a trickle of new claims in but it's slowed down a lot. And I would just reiterate that we've made material increases in the case reserves relative to a year-ago, it's above a 100% -- 15% increase there.

Randy Binner

Okay. Just -- can I just confirm those numbers you said for 2016, it was -- you added $11 million, and then for 2017, you added $47 million, and then for 2018 you added $33 million is that right?

Bob Myron

$53 million -- $53 million -- 53.

Randy Binner

Well, does that mean you took 2019 down to get back to the $76 million?

Bob Myron

No significant.

Sarah Doran

Those numbers were for the year, Randy, just to say. Bob, was citing enough for the quarter just to point out.

Randy Binner

Right. But that those -- those numbers summed a $100 million -- maybe we should take this offline, but I guess the question for right now is, so there's no material change to 2019, 2019 stays like around $262 million?

Bob Myron

So it's pretty close to where it was. I mean, we look at that year, and we look at how it's performing so far. And with our -- I think we've talked about before sort of the refocus of claims handling around Commercial Auto when we cancelled, when we significantly pared down this business, where we expect that year to where we'll can now we still think it's a profitable year.

Randy Binner

And then just one other follow-up. Thanks for all this, Bob. The 80%, you said of the remaining claims are from the 2019 and 2020 accident years, correct?

Bob Myron

2018 and 2019.

Randy Binner

2018 and 2019, okay. Got you.

Bob Myron

Yes, we don’t have any closure. We don't have any closure -- we don't have -- this was -- you -- well, it's just worked very quickly, reminding everyone how that worked. So we're not on risk for any accidents that happened after 12/31/19. It was done on a cut-off basis. So we don't have any claims from 2020.

Operator

Your next question comes from the line of Meyer Shields with KBW.

Meyer Shields

Thanks. Good morning.

Frank D'Orazio

Good morning.

Meyer Shields

I guess this is for Sarah. You talked about the diminished frequency of claims that clearly didn't happen. I was hoping you could update us on how you're thinking of severity for accident year 2020 and I'm asking both in general and because of the growth in Excess Casualty where we would imagine severity trends are typically higher?

Sarah Doran

I -- I got cut-off for a second; you're asking about the 2021 versus 2020, Meyer, I apologize. I didn't pick up that full question.

Meyer Shields

No. I'm actually asking for 2020 itself completely onboard with the idea that frequency is -- is -- the frequency benefits is going to holdup because these things just didn't happen. But I want to get a sense as to how you're seeing the severity assumptions underlying the accident year 2020 loss rate?

Bob Myron

Yes. So Meyer, so this is Bob. So we've seen in this small account casualty book, that's individually underwritten. We have not really seen it, when we look backwards, severity has been pretty benign. I think it's important to bifurcate a couple of things here.

First of all, in terms of the frequency decline in the stats that we've quoted here in, this is really related to the 2020 accident year, when we've looked at it. So not just claims that we received in the year but specifically related to 2020 accident year claims. But overall, in particular referencing back to the some of the stats that Sarah quoted, the dollars of loss emergence have been really benign in this book of business, right. And so we feel great about how where our loss picks are and we're hoping that we're continuing to build redundancy there.

But when we look forward, I think we're making a conservative assumption around loss trend, and what it probably been low-single-digits, we're making an assumption around probably mid-single-digits. And I think that, it's really less about the data that we're seeing because our paid and incurred actual dollars of loss are so benign. But I think we're just cautious that, while I think social inflation in the like has been a bigger issue with larger account business in some areas of exposure and assurance that we really don't get into, I think we're just cautious that, it's probably prudent to be raising that trend assumption more to sort of mid-single-digits. So hopefully, that was clear.

Meyer Shields

It was definitely, it's also exactly the right call. So that's good to hear. Getting sort of different messages around the industry. Can you talk about how Ceding Commissions are changing in Casualty Re?

Frank D'Orazio

Sure. Why don't I start that? There are some improvements in Ceding Commissions, I would not say significant, at least in the portfolio that we write, call it, point-ish roughly in terms of how we look at the improvements there. The more significant improvement that we're seeing relative to margin expansion is really in the underlying business. Maybe some terms as well, but for the most part, the lift we're seeing in the rate there.

Meyer Shields

Okay, good. There are some examples, I guess haven't seen related Ceding Commissions going up instead of down, so it sounds like you are not worried about that. And then finally, with the growth in the Excess Property, is there any material exposure to Texas weather a couple of weeks ago or last week?

Frank D'Orazio

So, obviously fair question, we have a fairly modest sized portfolio of Excess Property, it's heavily reinsured. Obviously, watching the events over the last couple of weeks closely monitoring and in constant touch with our claims folks, but we don't expect it to be a material event for the organization.

Operator

There are no further questions. I'd now like to turn the call over to Mr. Frank D'Orazio.

Frank D'Orazio

Okay, operator. And thank you to everyone on our call for your interest in James River. We look forward to reporting to you next quarter.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.