FedNat Holding Company
Q3 2017 Earnings Call Transcript

Published: 10 Nov 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Federated National Holding Company's Third Quarter 2017 Financial Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. Statements in this conference call that are not historical facts are forward-looking statements. Without limiting the generality of foregoing words such as anticipate, believe, budget, contemplate, continue, could, envision, estimate, expect, guidance, indicate, intend, may, might, plan, possibly, potential, predict, probably, pro forma, project, seek, should, target or will or the negative thereof or other variations thereon and similar words or phrases or comparable terminology are intended to identify forward-looking statements. The matters discussed on this call that are forward-looking statements are based on current management expectations involving risks and uncertainties that may result in the expectations not being realized. Actual events, outcomes and results may differ materially from what is expressed or forecasted in forward-looking statements made on this call due to numerous risks and uncertainties including, but not limited to, the risks and uncertainties described in this conference call, our press release issued yesterday and other filings made by the company with the SEC from time to time. Forward-looking statements made during this conference call speak only as the date on which they are made, and Federated National Holding Company specifically disclaim any obligations to update or revise any forward-looking statements to reflect new information, future events or circumstances or otherwise. I would now like to turn the conference over to Michael Braun, CEO. Sir, you may begin.

[Michael Braun:]

Good morning. Thank you for your interest in participation in our third quarter results for Federated National Holding Company. Yesterday, we reported our third quarter operating results, which was a loss of $5.5 million. The headlines in the quarter were, of course, Hurricane Irma and Hurricane Harvey. In light of these storms, which impacted our earnings by almost $25 million pre-tax and net of reinsurance, I believe our third quarter earnings represent our strong results. I'm particularly proud of the performance of our entire claims team, including our field and desk adjusters, agents, and strategic partners, all of whom have come together to provide excellent service to our over 28,000 insureds [ph] who have filed hurricane-related claims with us so far. Our reinsurance program has performed very well. Despite weathering the largest category 5 storm in the Atlantic Ocean in over a decade which triggered hurricane warnings throughout the state of Florida, we only utilized approximately 20% of our $1.5 billion per event reinsurance program. Our prepaid reinstatement feature operated as intended, restoring our full $1.5 billion per event limit reinsurance program on a highly cost-effective basis, with $1.9 billion of total remaining limit available for multiple future events. On the revenue front, excluding realized investment gains, the quarter was up almost 12% over third quarter 2016. This figure includes approximately 16% growth in total revenue and homeowners, offset by actions taken to reduce the size of our auto book, with auto revenues down 25% from the prior quarter and down 34% from the second quarter of 2017. There has been much interest in our auto book, so I'd like to take a moment to comment on our plans in this space. We have taken aggressive actions to exit rate inadequate programs and reduce the overall size of the book. By the end of the fourth quarter, no gross written premiums will be written on our discontinued automobile programs. The final premiums written will then gradually earn out over the following months. Turning back to homeowners, our Florida statewide average rate increase of 10%, which took effect on August 1, will mitigate the impact of assignment of benefits, also known as AOB, and improve our underwriting results in the coming quarters. As a final note, early in third quarter, before the arrival of Harvey and Irma, we continued with our previously announced share repurchase program, deploying $1.3 million of capital in the quarter. I'll now turn the call over to our CFO, Ron Jordan, to take you through the numbers a bit further, after which we will open up the call for questions and answers. Ron?

[Ron Jordan:]

Thanks, Mike. As Mike has already stated, our third quarter net loss was $5.5 million, which equates to $0.42 per diluted share. Our earnings benefited in the quarter from approximately $4 million or $0.30 after tax of realized gains from the sale of equity securities in the quarter. These gains were the result of a pre-Irma decision to reduce our exposure to the equity markets. From a book value perspective, these gains were partially offset by a $2.6 million related decline in unrealized gains and accumulated other comprehensive income. Losses in the quarter were impacted by approximately $27 million pretax from hurricane, including $21.4 million from Irma, $5.5 million from Harvey. $500,000 of the Harvey impact relates to our auto business in the state of Texas. The profit share provision on our non-Florida business reduces the economic impact of the storms by $2.3 million pretax. We also recorded in the quarter pretax $4 million of incremental revenue in our MGA, related to claims handling related to these storms. The additional claims handling revenue presents itself as lower net losses in our consolidated financial statements. Net of these two items, being the profit share and the additional claims handling revenue, the storms represented approximately $21 million of pretax impact on our financials or $13 million after tax. This represents a dollar per share hit to our quarterly earnings. These storms also represent 29 points on our net loss ratio, and using our gross loss estimates of $317 million across the storms, it's around 208 points on our gross loss ratio. Also impacting losses in the quarter was $1.5 million of strengthening in our 2017 homeowners book. Compared to the prior quarter and adjusted for Hurricane Irma profit share impact that I just alluded to, commissions and other underwriting expenses increased generally in line with premium growth. G&A expenses, while up from the third quarter of 2016, were flat on a sequential quarter basis versus 2Q 2017. I would be remiss if I did not address the balance sheet, and an event like Hurricane Irma has a significant impact on total assets and total liabilities due to GAAP presentation of loss reserves and reinsurance recoverables on a gross basis. Our reinsurance recoverable asset is up almost $300 million versus June 30 on those gross estimated losses of $317 million from Irma and Harvey that I just mentioned. The 80-plus reinsurers that are on our (inaudible) CAT program all have an A.M. Best or Standard & Poor's rating of A-minus or better, or have fully collateralized their maximum potential obligations in dedicated trusts. As such, we are confident in full recoverability of this receivable. With that, I'll turn the call back over to Mike.

[Michael Braun:]

Great, thank you. Operator, we're ready to begin Q&A, after which I'll make some closing remarks.

[Operator:]

[Operator Instructions] And our first question comes from Doug Ruth with Lenox Financial Services. Your line is now open.

[Douglas Ruth:]

Hi, Mike. I'm impressed with your ability to contain the losses. I thought you did a really nice job. Could you give us some ideas of what you think looking forward, what you're seeing in the reinsurance market and what you're thinking about some sort of rate increase for 2018?

[Michael Braun:]

Yes, good morning, Doug, thank you. In terms of reinsurance pricing, obviously most of that reinsurance comes from the London markets that we work with. They did get hit pretty hard, I would say, in multiple areas, including Puerto Rico. And then we also are very happy with the Bermuda markets. Many of those are public, and they have indicated that they see rates going up, reinsurance pricing going up in 2018. We'll see how much they go up, if they go up. Obviously, the market's been very soft for the last five or six years. I think capital is very efficient, how it can flow. So as there's talk of rates going up, I think you will see new capacity coming into the market. So it's really tough to say at this point whether they stay flat, whether they inch up 5 points, 10 points. We don't know. But we're prepared, we've got a lot of quality reinsurers on the program, and we've got multiyear programs in place, so we're confident whatever the market holds that we'll be fine.

[Douglas Ruth:]

And then what about, are you starting to think, how are you feeling about the adequacy of the rates that you're charging now for the homeowners?

[Michael Braun:]

Yes, it's a very unfortunate situation in the Florida marketplace. We continue to talk about AOB, which is assignment of benefits. That really flared up for us in early 2016 for accident year 2015, and really 2016 and 2017. It's not going away, unfortunately, and as you know we took our rates up 5.6% in 2016, another 10 points in 2017. And the consumer's paying for that. It's really unfortunate that the consumer is getting hit with that. Our shareholders have taken it on the chin as well, because once again what happens is when these things come into the marketplace and we react and we want to be there for our insureds, these claims, they get expensive. So we did take rate twice, and unfortunately I don't see a resolution coming with the legislative body in the spring, and that would lead me to believe that additional rate may be forthcoming, and once again, we want to make sure that we as an insurance company cover our losses as it relates to the attritional losses and have adequate rate. So I would say that while the market is soft, there's a lot of pressure on pricing for them to continue to increase.

[Douglas Ruth:]

Okay, and it seems like the Florida book still has some pockets of strength. Is that based on the relationship that you have with Allstate and Geico? Where is that these additional policies coming from?

[Michael Braun:]

Yes, we have some great partners that we work with. Once again, as I'll tell you, I believe we're a destination for our agents. People are always looking to place business with us because of how we service the business and how we handle our claims. So we're very confident in those partnerships that we have. Absolutely, Geico is our largest partner by far. Geico -- I'm sorry, Allstate and then Geico, as well as all the independent agents. I mean, they're critical to our success. We really see the opportunities. In terms of pockets of challenges within the state, there's a lot of talk about south Florida. Yeah, south Florida is a tough market. Orlando is a challenge, though. There's inadequate rate in the Orlando market, and we get a lot -- we do get AOB up there as well. So there's different parts of the state that we have challenges with. I wouldn't say there's any one piece that's really operating worse than the other. And once again, our voluntary business comes from our agents and will continue to do so. Business has cut back a bit with our rate increases, absolutely, and we've tightened up our underwriting because, once again, of the AOB impact on our book of business. But we're still writing voluntary business and will continue to do so…

[Douglas Ruth:]

And what's the status of Monarch at this point, are you issuing some policies through Monarch currently?

[Michael Braun:]

Yes, Monarch, unfortunately, as you know, as our shareholders well know, it's been unfortunate that we haven't been able to make it work much better. I would have liked to have deployed and written a book of $100 million-plus, but we're still at about a $13 million book. We're continuing to write a minimal amount of business, about $80,000 a week of new business in Monarch, and I do see the opportunity with it at the appropriate time. Once again, the pricing's a little high compared to some of the other players in the market. So it's unfortunate we haven't been able to deploy that capital more effectively to date, but I think that we've got opportunities with that on a go-forward basis.

[Douglas Ruth:]

Okay. And then is the expectation that the auto will do better in the fourth quarter, sort of looking out, that with the better rates that things should be a little bit better here in the fourth quarter?

[Michael Braun:]

Yes, and the expectation? Yes, I'd like to see it improve, but let me be very clear. Auto has not performed. We've had multiple products out there with different general agents. We've cut off multiple general agents. What you're going to see in 2018 is a book that definitely shrinks, so where we are on target to right about $70 million this year, you're going to see a book that's going to drop tens of millions. We're not going to necessarily take it to zero, because we're retooling some of the things that we're doing. We have a big investment in it, but from an underwriting side it needs to perform. Those programs that have not performed have been turned off. But unfortunately, when you turn off a program, it still does have earned premium in it, and as you earn that premium out and it's over 100, you're seeing these underwriting losses. So those worse programs have been cut off and at the end of Q4 you'll see that that premium will decrease and the loss ratio should improve, in part in Q4, but really into 2018. And we continue to evaluate what we're doing on our other programs that we believe are working correctly, and we're not growing those programs, we're containing them, and in fact tightening it up so they're going to continue to shrink a bit.

[Douglas Ruth:]

Okay. My final question is I see that you have about $81 million in cash. Do you have any thoughts about what you might do with the cash going forward now?

[Michael Braun:]

Well, there's multiple pieces to that. That's not all necessarily free cash nonstatutory in the holdco. So yes, we do have cash in various entities, and I know that you've been a big advocate of the dividend and the buyback in the past. I wouldn't say that we're not in the space at this time in my personal opinion. This is obviously subject to the Board. I don't see us expanding, increasing the dividend at this time. Clearly, I see the dividend staying where it is. We are comfortable where it's at. I don't see it really increasing at this point. And in terms of a buyback, obviously Irma and AOB have impacted us, and Harvey as well. So I don't see the buyback in the very short term. We're going to reevaluate that as we go on to the other side of year-end, and where we are with our capital and the insurance company and the holding company.

[Douglas Ruth:]

Okay. Well, thanks for answering my questions, and I think you really did a wonderful job under very difficult circumstances, and I'm grateful for that.

[Michael Braun:]

Yes, thank you, Doug. Have a great day.

[Operator:]

Thank you. And our next question comes from Greg Peters with Raymond James.

[CarlDoirin:]

Hi good morning. This is Carl Doirin for Raymond James. Just a followup on auto here. You were cutting off a bit at the beginning, Mike. I believe you said that you wouldn't expect any contributions to premiums post-4Q 2017 for the runoff auto? Is that correct?

[Michael Braun:]

No Carl. Thank you for clarifying. We have multiple general agent programs. Some of those programs had been discontinued earlier in accident year - in calendar year 2017, so you're going to see those premiums stop earning premium as that book of - runs off, as it evaporates. We do have other programs in place. We currently do have three programs with two general agents, so we're not vacating auto, we're continuing to constrict the size of the book and contract what we've got from an operation. So the book will be getting smaller. It has not been performing as it should be, and that's why we're making it smaller and trying to make those underwriting results, obviously, positive. But it's not going away, it's just getting smaller at this point. However, as I've said in the past, if we're not able to fix it, if we're not able to perform with it, then we would discontinue it.

[Carl Doirin:]

Okay, makes sense. But I guess year-over-year, if you're looking at the active programs, are you actually growing written premiums?

[Michael Braun:]

So the inactive programs obviously go away. The active programs are not growing. So once again, I think you're going to see 2018, just off the top of my head, I think it goes from $70 million perhaps in the $30 million range, to maybe as high as $40 million, and that would be on the existing programs. That does not include the programs that have been turned off already.

[Carl Doirin:]

Okay. And then you called out about $1.5 million in reserved development in homeowners. Did you see any uptick in AOB claims following the hurricanes, Hurricane Irma?

[Michael Braun:]

Yes, I don't know that we've seen that. It's just this AOB is pretty relentless. And you know, you're over there in Tampa. I'm sure you've seen the same commercials and billboards that we have throughout the rest of the state. So once again, we're not seeing -- we're seeing -- this is on the attritional losses -- we're seeing frequency, it's still elevated. But really, severity has come down quite a bit, but with those two, we're still at about 7 points up from where we were in 2015. That's big money that adds up real quick. So let me say it again. The frequency has definitely ticked up a bit, the severity has ticked down a bit, but we're still at about plus-7 points from two years ago.

[Ron Jordan:]

Carl, I think you've got this, but just to be clear, that's not prior year development, that's current year loss accident year strengthening.

[Carl Doirin:]

All right, thank you for the answers.

[Michael Braun:]

Thank you.

[Operator:]

Thank you. And our next question comes from Samir Khare with Capital Returns Management. Your line is now open.

[Samir Khare:]

Hi, good morning guys.

[Michael Braun:]

Good morning Samir

[Samir Khare:]

Hi, I think there is some a little bit of confusion on the notes I'm reading, so maybe you can help clear this up. If you normalize, if you remove the Cat losses and unwinding of I guess profit shares with the auto program and the additional claims adjusting revenues that benefit your quarter, what do you think your normalized earnings would be for the Q?

[Ron Jordan:]

Yes, as I mentioned in my remarks Samir, if I take out the Cat, the profit share, and the additional claims handling revenue, I think that impact overall is around $21 million pretax.

[Samir Khare:]

And just on the equity, should we expect any more selling down of equities? What allocation to equities are you ultimately comfortable with?

[Michael Braun:]

Yes, we're there now in terms of something that we're comfortable with. We have equities dialed in pre-hurricanes at roughly 10% of that surplus. That's a figure we're comfortable with. We were much higher than that prior to this takedown. So we shifted $30 million out of equities and I think we're in a place we're comfortable at this point.

[Samir Khare:]

What is that capital for the FedNat subsidiary at Q3?

[Michael Braun:]

It's down with the hurricanes, of course. We ended 2016 at around $140 million. We've taken hits from the storms in, say, the $16 million range, after tax, that basis. So that brings it down to about $124 million.

[Samir Khare:]

And that's reflective of the P&L in the other quarters, or is that just…

[Michael Braun:]

Yes, yes. That's a 930 [ph] ballpark…

[Samir Khare:]

And what's the holdco cash right now?

[Ron Jordan:]

It tends to be pretty stable at around $10 million if we're just talking about cash at the wholesale.

[Michael Braun:]

Liquid.

[Ron Jordan:]

Yes, adding in investments, it's more in the $30 million, $35 million range.

[Michael Braun:]

So liquid about $35 million Samir.

[Samir Khare:]

Okay, and any plans to downstream any of that into…

[Michael Braun:]

Yes. Obviously, once again, with these storms and the AOB, FNIC's surpluses come down a bit. So we're reevaluating our RBC as we speak and will ensure that the RBC is sufficient, that's risk-based capital, for everyone's benefit to ensure that we have sufficient capital in the insurance company, so we'll either downstream cash from the holding company or whatever we need to do to ensure that we're satisfied with that. We can also obtain other relief on the statutory surplus with quota share, which is another possibility, as well as, as you know, our balance sheet has very little debt on it. That's another opportunity for us. But I think in terms of capital, there's multiple options that we have to ensure that we keep FNIC strong.

[Samir Khare:]

Okay, and just on Q4 to date, has there been any noise with respect to storms? I know there's Hurricane Philippe or Tropical Storm Philippe.

[Michael Braun:]

Yes, that came through pretty quick through Florida, so nothing material at this point.

[Samir Khare:]

Okay. And just in light of potential dislocation in Texas and with respect to Harvey and Florida with respect to Irma, what do you think your real prospects are in the markets over the next year? Do you think they'll be [indiscernible] primary hard markets?

[Michael Braun:]

I'm sorry, growth in terms of in Florida are you saying Florida or not Florida?

[Samir Khare:]

Florida and Texas.

[Michael Braun:]

Yes, in Texas I think there's opportunity out there. We're very happy with our distribution. As you know, we have a partner that writes that business for us, and we're very happy with that distribution and Texas continues to ramp up. In terms of Florida, the market's a bit soft. So even with all the results that you're seeing in the marketplace, the market's still soft. So our focus is really not on the growth like it was two to three years ago, our focus is on the underwriting profitability. So we have slowed our writings and we're very happy to do so to once again manage our - to get to achieve the underwriting profit that we need. So I think that Florida market, you're going to see our growth as it's flattened out in 2016 and 2017, I think that remains the case into 2018 until other things change.

[Samir Khare:]

All right, specifically with Texas, I guess my question was is Harvey providing any dislocation that you can take advantage of that would have you grow more than expected?

[Michael Braun:]

Too early to say. Unfortunately, we do have a big auto book in Texas, and Harvey did a job on a lot of cars, as I'm sure you're well aware of. So that hurt us. But in terms of property, we think there's opportunities in Texas. The book will grow. But once again it's too early to say in terms of how Harvey's changed that market.

[Samir Khare:]

Okay, and just in auto, were there any cancellations of any of the programs in the quarter?

[Michael Braun:]

No, we still have three programs with two Gas, one for Florida, which is very small; Texas; and then Georgia. Those three programs remain constant. The other programs that we've turned off earlier in 2017 are nearing runoff in terms of their year-end premium, and that will stop in - or in premium, that is - in Q4. And we hope to have the worst of the auto behind us and we're confident in these programs that we have that we can make them work, but we need to show those results. If not, we'll discontinue the auto if we're not able to make that happen.

[Samir Khare:]

Okay and then I think you spoke about tightening up or remediating some of the ongoing programs. What was the problem and what were the actions that were taken?

[Michael Braun:]

Well, unfortunately our timing was terrible in terms of auto. We expanded from about a $10 million book to a $70 million book in two markets, Texas and Georgia, that did not go well. So we made some mistakes with some of the general agents that we did in terms of the distribution, but also auto has been feeling pressure in the industry for the last year or 2, and specifically in those markets. So we've taken some rate and the general agents have modified their underwriting as well.

[Samir Khare:]

And if you were to look at your worse-than-expected results in auto, how much would you attribute to what I'll call the tail of the discontinued programs versus the remediating part of the ongoing programs?

[RonJordan:]

What I could tell you there is that our ongoing programs have a loss ratio from a loss and lay perspective of 30 points lower than that of the discontinued programs. With that said, and as Mike's alluded to, the premium is continuing to shift. The overall mix of the premiums continues to shift to the active programs, and so those results are going to improve quarter-on-quarter as that shift continues.

[Michael Braun:]

Samir a big difference between the dead programs and the active programs. However, we're still not happy with where we're at on the active programs. They need to run better, period. And we've got a lot invested into it. We're not going to endlessly chase the profit on those programs. They need to perform better, period, or they will be discontinued.

[Samir Khare:]

Okay, what was the premium allocation from discontinued programs versus continued programs in the quarter?

[Michael Braun:]

It was about 75% active programs, 25% inactive programs.

[Samir Khare:]

On an earned basis?

[Michael Braun:]

On an earned basis.

[Samir Khare:]

Okay and I think you said this, Mike, but you are taking and you have been taking in the last quarter rate increases in the ongoing programs?

[Michael Braun:]

In the auto programs? Correct. On the active ones, correct.

[Samir Khare:]

Okay and then what are your hopes for the loss ratio to get to in the auto program?

[Ron Jordan:]

Well, from a loss and AOA [ph] perspective, I think with the new Georgia program, we're already achieving a nice low loss ratio. I think where the opportunity for improvement exists is within these four walls in terms of some of our claims handling practices, and we expect to see our total loss ratio come down as we retool.

[Samir Khare:]

Okay, thanks a lot. I appreciate it.

[Michael Braun:]

Thanks Samir.

[Operator:]

Thank you. And our next question comes from Anthony To with KBW. Your line is now open.

[Anthony To:]

Hi good morning, thank you for taking my questions.

[Michael Braun:]

Good morning, Anthony.

[Anthony To:]

Hey good morning. I apologize that I missed this earlier in your prepared remarks, but I guess just some housekeeping items. What was the gross loss ratio ex-Cat and payroll development in 3Q 2017, and then I guess the same time a year ago?

[Ron Jordan:]

I've got, just one moment, a stack of papers here and I got to get sort of the right one. So gross loss ratio in the quarter ex-Cat, we've got it at about 47, and a year ago it would have been about 46.

[Anthony To:]

Great, thanks. And I guess the ceded premium was a bit higher than we expected. How should we think about this for the balance of the year, and is this a good run rate moving forward?

[Ron Jordan:]

Yes, the ceded premiums, I agree, that certainly on a sequential quarter basis they look elevated. Some of that pertains to the nature of our expiring quota share treaties that were retrospectively rated treaties. Under those treaties, losses are ceded after they're paid as opposed to when they're incurred, and then there's an experienced account provision and the like. So what the end result of all that is that we will continue to have ceded premiums and ceded losses related to business from before June 30, 2017, when the 10% treaty expired, and even from before June 30, 2016, when the 30% treaty expired. And when those sessions happen, it's going to impact ceded premiums and it impacts ceded losses, but frankly it's a little bit of accounting noise more so than it is economics, and that's over $4 million of the elevated ceded premiums in the quarter. So there's definitely some non-economic accounting noise from those retrospective rated treaties.

[Anthony To:]

Is there any idea of what it looks like normalized?

[Ron Jordan:]

That $4 million, effect of those, could certainly come down over time. I think in terms of what is economic in those numbers, we do, as we said in the press release, we do have a slight increase in the overall cost of our Cat program going forward, and that's in the range of $600,000 to $700,000 a quarter.

[Anthony To:]

Great thanks. Now just getting into rates, I guess how confident are you in getting rates for the Florida homeowners book following Irma? And I think you've also mentioned previously that you needed a bit more rates for AOB-related issues. So I guess my question is, is there any resistance in receiving both rates for AOB and related storms?

[Michael Braun:]

Well, so, really, you get the rate for the storm. So what I mean by that is we've already been - we're not going to get rates because of Irma or Harvey. That's not how it works. We've already had our anticipated retention on there and our reinsurance cost. The driver of our rate has been AOB. I think we recouped the majority of it, but there's still continued pressure from it. So I do believe that there'll be additional rate action in 2018. It's too early to say what it's going to be. We do our annual filing for FNIC as of August 1. But I would anticipate that you're going to see another rate increase requested from us, and I think the department does a fantastic job. They're always looking out for the consumer. However, they're very fair and they look at what we present and I'm confident if we can demonstrate a need for an additional rate increase that they would work on us. But they don't just rubberstamp anything. It's not going to happen unless we can demonstrate that need. So we'll know more as we progress in 2018.

[Anthony To:]

Great thanks. And I guess lastly, can we get a walk-through around the $2.3 million of profit sharing relating to Hurricane Harvey? And then I guess why does that profit sharing benefit the expense ratio?

[Michael Braun:]

Say that last question again?

[Anthony To:]

Yes, lastly it would be why does the profit sharing benefit the expense ratio?

[Ron Jordan:]

I'll take that and then Erick can speak to the mechanics of the calculation better than I can. But by virtue of being a profit share, that provision is essentially like a commission. It essentially is adjusting the commissions to our just distribution partner in the non-Florida book, and that's why - so when a storm comes along, Harvey, $5.5 million, there's this 50% profit share in place. They're bearing half of that cost so the profit share payable, so to speak, drops accordingly, and as a result it's a lower commission expense benefiting that line in the financials. Does that take care of you or were you wanting some more on the mechanics?

[Anthony To:]

No, I think that's fine. Thank you so much for the answers. I'll get back into queue.

[Ron Jordan:]

Thank you.

[Operator:]

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back to Michael Braun, CEO, for any further remarks.

[Michael Braun:]

Well, thank you, Grace. As always, everyone on the call, we appreciate the hard work of our entire team at Federated National and the trust that our partner agents and policyholders have placed with us. Thank you to everyone this morning and I want to remind all our investors to always feel free to reach out to Ron, Erick, or myself with any followup questions that anyone may have. With that, everyone, I wish you a great day. Thank you.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.