Prudential Financial, Inc.
Q4 2017 Earnings Call Transcript

Published: 8 Feb 2018

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Prudential Quarterly Earnings Call Fourth Quarter 2017. During today's conference all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. As a reminder, today's conference is being recorded I would now like to turn the conference over to your host, Mr. Mark Finkelstein. Please go ahead.

[Alan Mark Finkelstein:]

Thank you, Shannon. Good morning and thank you for joining our call. Representing Prudential on today's call are John Strangfeld, CEO; Mark Grier, Vice Chairman; Charlie Lowrey, Head of International Businesses; Steve Pelletier, Head of Domestic Businesses; Rob Falzon, Chief Financial Officer; and Rob Axel, Principal Accounting Officer. We will start with prepared comments by John, Mark and Rob and then we will answer your questions. Today's presentation may include forward-looking statements. It is possible that actual results may differ materially from the predictions we make today. In addition, this presentation may include references to non-GAAP measures. For reconciliation of such measures to the comparable GAAP measures and a discussion of factors that could cause actual results to differ materially from those in the forward-looking statements, please see the section titled forward-looking statements and non-GAAP measures of our earnings press release, which can be found in our website at www.investor.prudential.com. And with that I will hand it over to John.

[John Robert Strangfeld:]

Thank you, Mark. Good morning, everyone and thank you for joining us. 2017 was a strong year for Prudential. We exceeded our earnings objectives for the year and are showing solid momentum across our businesses. I will provide some higher level observations on results for the fourth quarter and full year, the underlying fundamental trends in our businesses, and capital deployment and I will then hand it over to Mark and Rob to go through the specifics. Fourth quarter operating earnings, excluding market driven and discrete items of $2.58 per share exceeded the prior year of $2.43 per share. The increase reflects business growth and higher (2

[Mark B. Grier:]

Thanks, John. Good morning, good afternoon, or good evening. I'll take you through our results and then I'll turn it over to Rob Falzon, who will cover liquidity, leverage and capital highlights. I'll start on slide 2. After-tax adjusted operating income amounted $2.69 per share for the quarter compared to $2.46 a year ago. After adjusting for market driven and discrete items of $0.01 per share, EPS amounted to $2.68 for the quarter, up from $2.43 a year ago. Core performance of our businesses overall was solid in the quarter with results benefiting from higher fees in our Annuities and Investment Management businesses and continued business growth in International Insurance on a constant currency basis, partially offset by higher expenses. In addition, other related revenues in our Investment Management business of $92 million in the quarter were $70 million higher than the year-ago quarter as a result of higher incentive fees and stronger strategic investing results. Together, these items had a net favorable impact of approximately $0.27 per share on the comparison of results to a year ago. Current quarter results also reflect a net benefit from certain items that varied from our average expectations. This includes non-coupon investment returns and prepayment income, which were about $90 million above our average expectations in the quarter. This was offset by the impact of less favorable underwriting results relative to expectations in our Individual Life and Retirement businesses and other refinements that amounted to $45 million. The net effect of these items resulted in a benefit of about $0.07 per share. In thinking about our earnings pattern, I would also note that we estimate current quarter expenses for items such as technology and business development, advertising, annual policyholder communications and other variable costs were about $165 million or $0.25 per share above our quarterly average for the year, consistent with the historical pattern we mentioned when we discussed our third quarter results. On a GAAP basis, we reported net income of $3.8 billion for the current quarter or $8.61 per share. GAAP net income in the current quarter was about $2.6 billion higher than our after-tax adjusted operating income and included a $2.9 billion or $6.64 per share estimated tax benefit related to the enactment of the Tax Cuts and Jobs Act and about $600 million of pre-tax net realized investment losses. Turning to slide 3, I'll address the financial impacts of the Tax Act. The current quarter tax benefit of $2.9 billion from the enactment of the Tax Cuts and Jobs Act includes two key components

[Robert Michael Falzon:]

Thank you, Mark. Now turning to slide 19. I'm going to provide an update on key balance sheet items and financial measures. We view the RBC ratios at Prudential Insurance, or PICA and PALAC as well as the composite RBCs shown here to be important measures of our financial strength. Having said that, as we've highlighted previously, we manage our annuity risks using an economic framework that includes holding total assets to a CTE 97 level with the ability to maintain that level through moderate stresses. As a consequence, over time we may see some variability in the excess of PALAC's RBC over our target ratio. We expect that the reduction in the corporate tax rate from 35% to 21% as part of the Tax Act will result in a reduction of statutory deferred tax assets and an increase in certain statutory reserves, which will adversely affect the statutory capital position of our domestic insurance companies for 2017. However, while statutory results are not yet filed, we expect that our Prudential Insurance, PALAC, and composite RBC ratios will each continue to be above our current 400% AA target as of year-end, including the estimated impacts from the Tax Act. In Japan, Prudential of Japan and Gibraltar Life reported strong solvency margins of 893% and 935% respectfully as of September 30. These solvency margins are comfortably above our targets and we estimate that they continue to be so as of the end of the year. Looking at liquidity, leverage, and capital deployment highlights that are on slide 20, cash and liquid assets at the parent company amounted to $4.4 billion at the end of the quarter which was consistent with last quarter. Cash inflows during the quarter supported approximately $635 million of shareholder distributions which were about evenly split between dividends of $321 million and share repurchases of $313 million, and also funded debt maturities and other business operations. Our financial leverage and total leverage ratios as of year-end remained within our targets. And as John noted, we returned $2.6 billion to shareholders during the year through dividends and share repurchases and announced a 20% increase in our quarterly dividend yesterday. I would also remind investors of two items we communicated in our guidance that we expect to have a positive impact on adjusted book value in the first quarter of 2018 of roughly $1 billion. We'll implement the new accounting standard that impacts the treatment of equity investments and which will result in a reclass of net unrealized gains of approximately $900 million from AOCI to retained earnings. In addition, we intend to eliminate the one-month reporting lag in our Gibraltar operations so that Gibraltar's first quarter results reflect January through March activity. This would not result in an extra month of Gibraltar earnings in our 2018 results, but instead would essentially result in an adjustment to opening equity. Now, I'll turn it back over to John.

[John Robert Strangfeld:]

Thank you, Rob. Thank you, Mark. We'll now open it up for questions.

[Operator:]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Our first question is from the line of Ryan Krueger with KBW. Please proceed with your question.

[Ryan Krueger:]

Hi, thanks, good morning. Following the impacts of tax reform and the varying impacts to both cash taxes and GAAP effective tax rates, do you still feel comfortable with the 65% free cash flow conversion guidance?

[Robert Michael Falzon:]

Ryan, it's Rob. Yeah, we're comfortable that, again, on average over time, the 65% ratio of free cash flow is something that the businesses will continue to produce. If we look at the impact of tax reform, we expect cash taxes to actually be lower over the course of the next few years, primarily from not incurring U.S. taxes on repatriations from Japan and the utilization of accelerated tax credits on our U.S. taxes. So we expect most of the near-term increase in after-tax AOI resulting from tax reform to actually translate into free cash flow, even including the amortization of the one-time toll tax that we mentioned of about $500 million. Longer term, there are more variables that come into play, but we generally expect reform to be neutral or a positive to future year's cash – cash flow. And so, we remained with our guidance around the 65% free cash flow ratio.

[Ryan Krueger:]

Thanks. And then a related question on the, I believe it was on the outlook call, you stated that you expected the PICA/RBC ratio to remain above 400, even if the NAIC changes the denominator factors. Is that still the case as well?

[Robert Michael Falzon:]

Yes, it is. So, what you saw is, two of the biggest pieces related to that came through as of year-end. So that was the reduction in the DTAs and the increasing of reserves, primarily around AAT reserves that get adjusted as a result of the lower taxes. So, those are both baked into the numbers that we'll produce as of year-end, and while we haven't published those yet, and therefore we don't want to be overly specific, we're comfortable that that number is going to come out ahead of our – or above our 400% target for AA as we're currently labeling that. The remaining piece that's a potential would represent about half of the 100 basis point decline in RBC that we had given for the totality of the impact of tax reform. When and how that actually manifests itself is still unknown, but we've assumed that a recalibration of the metrics without any adjustments going from 35 down to 21 (36

[Ryan Krueger:]

Okay. Great. Thank you.

[Operator:]

The next question is from the line of Erik Bass with Autonomous. Please go ahead with your question.

[Erik Bass:]

Hi, thank you. Sticking on the topic of taxes, as you look across your U.S. businesses, how do you see tax reform affecting competitive dynamics and pricing?

[Stephen P. Pelletier:]

Erik, this is Steve. Let me address your question. And I'll just start by saying that, as you know, we regularly review our product pricing and update key assumptions as appropriate. And there are a number of factors that we consider as part of that, tax impact being just one of them. I think the most meaningful impact from the tax reform will likely not really be derived in regard to new product sales, but rather simply from applying lower tax rates for the results of our In-Force business. For products that do, where our at issue returns do benefit from the tax reform, I think it'd be reasonable to expect that some portion of the benefits realized from that will be competed away over time. However, we see this happening over time and at varying rates of speed in our varying businesses, depending on the competitive landscape in each of those businesses. And throughout this, our primary focus will continue to be ensuring that we price our products for sustainable profitable growth. In terms of the lowering of tax rates and does that impact the value proposition that we offer to customers, we don't believe so. We believe that even at lower tax rates, our insurance solutions continue to offer a strong value proposition and help to meet our customers' financial needs.

[Erik Bass:]

Thank you. And I guess post tax reform we've also seen a number of large corporates that have announced contributions to their pension plans. And when we combine that with rising interest rates and higher PBGCs, are you seeing an increase in interest in PRT transactions, particularly amongst jumbo plan sponsors?

[Stephen P. Pelletier:]

Yes, Erik, we do see a very, very healthy pipeline at the start of the year, and it's for the reasons that you mentioned. Ability to transact is bolstered by increasing funding levels and that's driven by both an uptick in rates and the contributions that you mentioned. A significant number of plan sponsors have made contributions in 2017 to their plans and they have until September to do so and to take advantage of the lower 2017 tax rates. So, ability to transact is very strong and propensity to transact continues to be bolstered by the factors that we've mentioned before on these calls, such as rising PBGC premiums, increasing awareness of the longevity risk, and that increasing awareness being reinforced by new mortality tables. So, all of those factors around both ability and propensity to transact really make for a healthy pipeline here at the early stages of the year.

[Erik Bass:]

Great. Thank you.

[Operator:]

And the next question is from the line of Suneet Kamath with Citi. Please proceed with your question.

[Suneet Kamath:]

Thanks, good morning. Wanted to start with the VA business, in particular on the hedging program. Just given a lot of the volatility that we've seen just in the past week particularly related to volatility-related products, do you have any exposure to those products or can you talk about what you've just seen in your hedging program just recently?

[Robert Michael Falzon:]

Sure Suneet, it's Rob. So, first of all, big picture – this is a good story and it's consistent with the prior messaging that we've been giving around the increased stability and predictability around our Annuities business. So let me break it down into pieces. Let me talk first about the last part of your question which is the hedge performance during the course of the quarter. So, we include volatility in our hedging. We don't hedge the VICs directly, but we have options and other things and they – and so, volatility is expressed through that. Our actual breakage month-to-date for February was only around $45 million. Now I'll remind you, that's on a liability that's in excess of $9 billion. And so that's consistent with the kind of hedging efficiencies that – and effectiveness that we've been seeing in prior quarters and prior years. If you look back at the fourth quarter, the way in which we look at our effectiveness, we're at 90% or above in terms of our hedge effectiveness. So, the second piece then in terms of volatility. So obviously there are multiple pieces of volatility that you want to think about. There is a direct increase in hedge costs when volatility increases within a period. And to the extent that volatility gives rise to breakage, you have that indirect cost as well. Now, those costs are subject to the fact that one, as I noted we hedge at 2 (41

[Suneet Kamath:]

Okay, that's helpful. The other follow-up I had was related to the auto-rebalance. So, the trend has been, falling equity markets and rising interest rates. And as you pointed out, I think the algorithm would shift funds into fixed income option. What happens if we sustain this type of environment, i.e., equity markets continue to drop and interest rates rise? Doesn't that auto-rebalance end up working against account value growth at some point?

[Robert Michael Falzon:]

So, to the extent the auto-rebalance leaves people within – more skewed toward bonds and equities, they stay in that position until a point at which the equity markets rise and auto-balance begins to work in the other direction. So if you have an environment where equity markets remain relatively flat, they'll be in a fixed income instruments. Obviously, the duration of that fixed income fund is sort of – it's sort of a mid-range duration. I remember it specifically, five years, six years, something like that. So as interest rates rise, as they're in that over time, they'll get higher yields out of that as the yield in the – on the assets in that fund increase. Now, if equity markets further decline, obviously they're going to be protected from that because we'll continue to auto-rebalance out of equities and into fixed income. And so, they'll eventually hit a floor where further equity market declines will be – they'll be fully insulated from those kind of movements. Steve, I don't know if you want to elaborate on that.

[Stephen P. Pelletier:]

Yeah, I'll just add a couple of points, Rob. First of all, just remember that the fixed income vehicle is a corporate bond fund, and so spreads come into play as well. But also, just a more fundamental point that we've consistently emphasized. The auto-rebalancing program is not an account value optimizer. That's not what it's about. It's about the support of our risk profile over an extended period of time and making sure that we're able to responsibly offer the benefit that we do in our product design. So that's really the underlying and fundamental purpose that we very much discuss with our customers' about the auto-rebalancing program. It's not meant to optimize account values.

[Suneet Kamath:]

Okay, thanks.

[Operator:]

And the next question is from the line of Alex Scott with Goldman Sachs. Please proceed with your question.

[Alex Scott:]

Morning. First question just on the Investment Management business and some of the incentive and transaction fees, or the strategic fees you mentioned. Can you discuss the timing of those and if you have any kind of visibility that they will remain elevated for some period here in 2018?

[Stephen P. Pelletier:]

Alex, it's Steve. I'll address your question. First of all, incentive and performance fees often do have some seasonality. It's not unusual to see them emerge in the fourth quarter, if we've earned them. In terms of what happened this quarter, we saw those elevated incentive fees actually across multiple asset classes

[Alex Scott:]

And follow-up question on Individual Annuities. The surrenders and withdrawals kind of ticked up a bit more than in previous quarters. Is that a trend that you'd expect to escalate? Are there any things you're doing on the sales front relatedly to maybe offer products that don't require rebalancing or things like that that you'd expect to help sales and offset some of the outflow?

[Stephen P. Pelletier:]

Alex, again, I'll address your questions. It is not at all surprising for us to see elevated lapses and withdrawals in this quarter. I'd mention a couple of things. First of all, just in terms of the market conditions, we expect to see elevated lapses in our – as interest rates rise. And interest rates rising is usually associated with alternative solutions becoming available that clients may go into. I would also recall that that correlation of rising interest rates is built into how we manage our actuarial assumptions in the business and our risk management in the business. So, that kind of dynamic relationship between rising interest rates and lapsation is really built into what we do. On a longer term basis, I'd also recall that as more and more of our In-Force business emerges from a surrender period, we would expect to see that. In terms of new product design, we just last week launched a fixed-index annuity product. And so, we see that as offering a fuller suite of product designs to our distribution partners and their clients and we have other products in the course of this year that we expect to introduce into the marketplace.

[Alex Scott:]

Thanks for the answers.

[Operator:]

The next question comes from the line of Tom Gallagher with Evercore ISI. Please proceed with your question.

[Thomas Gallagher:]

Good morning, Steve, another one for you just on the auto-rebalance Highest Daily value product. I just want to make sure I understand the dynamics that are happening with it and the way the product works, again. So, correct me if I'm wrong, but my understanding is the vast majority of your portfolio has the Highest Daily feature. If equity markets decline over 10%, the auto-rebalance kicks in and I think fully moves into fixed income or largely moves into fixed income at down 20 (51

[Stephen P. Pelletier:]

Tom, I'll address your question. The activation of the auto-rebalancing program is not based on overall certain level of market decline. Actually, auto-rebalancing would, under normal circumstances, kick in well before a 10% market decline. Again, to emphasize, the auto-rebalancing program is driven by our evaluation of the risk profile in each and every one of our HDI products and then the aggregation of that change in risk profile of all those individual contracts. That's what drives auto-rebalancing activity

[Robert Michael Falzon:]

Yeah. So, a couple things, Tom. First, just to put some numbers on Steve's point, if you – if we look at what happened in February, so the big movement on the 5th of February, we were down about 4%. It was a little over a $500 million transfer in the auto-rebalance out of equities into fixed income as a result of that movement. So, well before we hit the 10%. But again, put that in the context of a $9 billion overall liability and you sort of get some sense for how that works. With respect to your return on asset – the implications on the returns on assets is sort of what I was going through before, Tom, is it actually – that in and of itself would not – the algorithm, the rebalancing in and of itself is not going to change the ROA that we're getting out of the business. Recall first that the fees are charged on the guaranteed value, and so, therefore to the extent that we're in fixed income or otherwise, or markets move down, our fees are not diminished by virtue of that. And then secondly, the fact that we actually have less hedging cost, just like if we had more hedging costs, we're going to look at that as being periodic and we have a longer-term view of what the hedging costs would be over the life of the contract, and absent changing that, those – that interim, in that particular case, lower hedging costs if we're more in fixed income than equities, is something that we're going to amortize in over the life of the contract. So, we'd have probably a modest positive impact in terms of less hedging costs than what we've built in, but not material in any way and not highly volatile either. And I'm sorry, was there another part to your question, Tom?

[Thomas Gallagher:]

No, that was good, Rob. That did it on VA. And then just my follow-up is, just on the topic of long-term care, I know it's something that you all took a charge on several years back, I'm going to say maybe four years ago or five years ago. Just out of curiosity, do you still have, after that charge, just based on your experience to-date, is there still margin there? Is that something we should be watching out for from a development standpoint, 2018-2019? Can you comment a bit about what you're seeing on ongoing trend there?

[Robert Michael Falzon:]

Yeah, so let me share a couple observations, Tom. First, let me start with the caveat that our book here is a relatively small book. So, we've got 215,000 policies, 6 billion in reserves, and you can kind of put that in the context of others in the industry that are much more significantly in this product. A couple other things I'd also mention just to sort of lay out the nature of our book. We're – it's a more recent vintage book, Tom, so that's when plan designs got more conservative. And about two-thirds of the book is Group as opposed to Individual. And, again, the plan designs were more conservative in the Group long-term care policies than they were in the Individual. With respect to our assumptions, we look at those every year. So, yeah, we did the big assumption update in 2012 and had the GAAP loss recognition event. I think that's what you're referring to. But every year we continue to look at that. And the assumptions that we have in place for that book, we look at both with regard to our own experience and with regard to industry experience and we are in line, if not generally on the more conservative end of that industry experience that's available to us. Now, I'd throw a caveat in there, and that is that our book is relatively nascent as I mentioned, so it's got – a little over 1% of the book is actually in payout at this point in time. And I'd say the same thing of the industry, which is that the experience of people is still evolving and that we all have to watch for how that experience may change, what we've currently seen. So, while assumptions may reflect experience to-date, that's not to say that experience can't change as more and more of the book goes from the deferred status to active status. And then, so get to your very specific question, we have a cushion above our loss recognition that's in excess of $500 million, and so we feel pretty comfortable with that level of cushion with the realization that we'll constantly be updating our assumptions. And we'll look to do that in the second quarter of next year.

[Thomas Gallagher:]

Okay. Thanks, Rob.

[Operator:]

The next question is from the line of Jimmy Bhullar with JPMorgan. Please proceed with your question.

[Jimmy Bhullar:]

Hi, good morning. I had a couple of questions. The first one, just on the VA business. Your surrender has picked up significantly and I realize the book is aging, but they did pick up noticeably from the previous quarter. So, what drove that and what's your outlook for just withdraw rates in general in the VA business? And then secondly, just on international agent count. So, Gibraltar, the agent count I think was down a little bit sequentially. Japan Life plan are declined as well. Is that more seasonality or is it something else going on? And your outlook for that as well.

[Stephen P. Pelletier:]

Jimmy, it's Steve. I'll answer the first part of your question. As I mentioned, in a rising interest rate environment, we would expect to see withdrawals and lapses in the variable annuities business. Rising interest rates are usually associated with the emergence of alternative solutions, and thus it would be only natural to see increased lapsation in that for that reason in addition to the emergence from surrender charges, as you mentioned, as a longer term trend. And again, I just mentioned that we have thoroughly incorporated that correlation into our actuarial and risk management underpinnings for this business. The assumptions we make call for a dynamic relationship between direction of interest rates and lapsation.

[Charlie F. Lowrey:]

Jimmy, it's Charlie. Let me talk about both Life Planners and then, as you mentioned, Life Consultants. So, in Life Planners, in Japan they were up 3%, but to your point, you are correct. There is some seasonality with regard to Life Planners. So, recall that transfers to sales managers generally happen twice a year, in the second quarter and the fourth quarter, and we had a very – we had a high number of LPs transferred this quarter, resulting in an increase in sales managers year-over-year by 11%. Now, that's good because these new sales managers will contribute to future recruits and continued LP growth. But they do lower the current LP count. We also had a higher number of secondees that were transferred to the bank channel. So there are a lot of ins and outs, especially in the second and fourth quarter, but the long-term average for POJ and, frankly, for Life Planners in general is about 2% to 4%. So if you look over a five-year period for all of Prudential International Insurance, the LP growth rate in total has been about 2% or so. So, slow and steady growth of 2% over the long-term is what you should anticipate. Now, with the Life Consultant count, that's a bit of a different story. So the Life Consultant count decreased by about 6% year-over-year, and this is due to the adherence of more stringent validation and recruiting processes that we put into effect and that we talked about last quarter. And that really has a double effect. The first is that there are more terminations from stringent validation requirements that are being enforced, but also with higher recruiting standards, you have less recruits. And it's tough to do this, because when you elect to do this, there's a bit of a J-curve of sorts. So while we were flat versus prior quarter, we're not yet at the bottom of the J-curve. And I think we said last quarter, it'll take really most of this year to get to the bottom. But we think we'll hit the bottom later this year, and it's exactly what we've done in several operations outside of Japan over the past eighteen months including Korea and Taiwan, going back to the basics and increasing the quality of the field. Now a proof point to what we're doing is the fact that while LC count, the Life Consultant count decreased by 6%, sales only decreased by 4% in this market. And therefore, what you'd expect to see and what you're seeing especially at first is that as you take off essentially the bottom of the Life Consultants, if you will, the ones that aren't performing well, you'd expect to see sales go down less than the Life Planner count. And that's exactly what we saw. That won't happen every quarter, but we did expect to see it in the first quarter and that's what we saw.

[Jimmy Bhullar:]

Thank you.

[Alan Mark Finkelstein:]

Shannon, we have time for one more call – question.

[Operator:]

And the final question comes from the line of Humphrey Lee with Dowling & Partners. Please proceed with your question.

[Humphrey Hung Fai Lee:]

Thank you for taking my questions. A question on Investment Management. So, the fee rates has been pretty stable to slightly improving and part of it I believe is from the mix shift towards the fixed income. I guess at a high-level, like, how much better is your average fee rates for your inflows versus your average fee rates for your outflows?

[Stephen P. Pelletier:]

Humphrey, it's Steve. I'll address your question. We've seen secular pressure on fees in the Investment Management industry overall. And actually, that's been not just in the active space, but also in the passive space. There's been considerable fee compression. In the face of that, we've been able to keep actually pretty stable fees overall in our book. Now – and to address your question, rather than speak about the fee rate on outflows versus fee rate on inflows, I'd point out, we have not been immune in all portions of our platform to fee compression. That's not where our stable fee rate comes from. We've experienced that fee compression in various parts of our platform, in particular, in retail portions. However, we have been able to draw flows into higher fee-yielding strategies in – particularly in fixed income, as you mentioned, and in other areas as well such as real estate. So given the multi-manager model and given our ability to draw flows into a variety of strategies, including ones that yield higher fees, we feel well positioned to compete even in this period of secular pressure on fees.

[Humphrey Hung Fai Lee:]

Got it. And then just a follow-up question to Tom's earlier question on long-term care. So you mentioned there's 6 billion for reserves. Is that GAAP or Stat?

[Stephen P. Pelletier:]

That was Stat.

[Humphrey Hung Fai Lee:]

Okay, and then would the reserves be kind of similar to the split between the Group and the Individual side, one-third/two-thirds, or how should we think about that?

[Stephen P. Pelletier:]

So remember the size of the book is – yeah, if you look at the two-thirds versus one-third that would be probably a pretty good indicator. I don't have the number off the top of my head, Humphrey, but I think it's – we'll have someone follow up with you specifically, but I would think about it being roughly that order of magnitude, because they're both relatively nascent books.

[Humphrey Hung Fai Lee:]

Okay, got it. Thank you.

[Operator:]

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.