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Good day. Welcome to the Reinsurance Group of America First Quarter 2019 Results Conference Call. Today's call is being recorded.
At this time, I would like to introduce Mr. Todd Larson, Senior Executive Vice President and Chief Financial Officer; and Ms. Anna Manning, President and Chief Executive Officer. Please go ahead, Mr. Larson.
Thank you. Good morning, everyone, and welcome to RGA's first quarter 2019 conference call. With me this morning in St. Louis is Anna Manning, RGA's President and Chief Executive Officer. Anna and I will discuss the fourth quarter results after a quick reminder about forward-looking information and non-GAAP financial measures. Following our prepared remarks, we'll be happy to take your questions.
To help you better understand RGA's business, we'll make certain statements and discuss certain subjects during this call that will contain forward-looking information, including, among other things, investment performance, statements relating to projections of revenues, premiums or earnings and future financial performance and growth potential of RGA and its subsidiaries.
Keep in mind that actual results could differ materially from expected results. A list of important factors that could cause actual results to differ materially from expected results is included in the earnings release we issued yesterday.
In addition, during the course of this call, we'll make comments on pre-tax and after-tax adjusted operating income, which is considered a non-GAAP financial measure under SEC regulations. We believe this measure better reflects the ongoing profitability and underlying trends of our business. Please refer to the tables in the press release and quarterly financial supplement for more information on this measure and reconciliations of net income to adjusted operating income for our various business segments. These documents and additional information may be found on our Investor Relations website at rgare.com.
And now, I'll turn the call over to Anna for her comments.
Thank you Todd and good morning. As indicated in our press release last night, we reported adjusted operating EPS of $2.61 for the quarter compared to $1.61 a year ago. The results for the quarter were above our expectations, providing a good start to the year. Organic growth remains strong and we continue to be active on the transaction front. We also continue to benefit from earnings diversification as strong bottom line results from Asia and Canada supplemented inline in results and offset some modest weakness elsewhere.
As we have commented in the past, our business lines and segments will see some volatility in the short-term, but this is generally tends to even out over longer periods and our global platform which is diversified by both geography and products delivers attractive financial results over time. Some key points of interest in the quarter, reported premium growth was 6% and estimated organic premium growth in constant currencies was approximately 9% from the combination of solid growth in the U.S., high single-digit growth in EMEA and 20% plus growth in Asia.
Premium growth this quarter reflects continued execution of our strategy despite some life insurance industry challenges. Asia continues to be a very successful story as in the quarter we delivered strong top line growth, healthy new business activity and favorable underwriting results. As we have discussed in the past, product development is a key differentiator for us in Asia and we expect the good momentum to continue there. Canada had another strong quarter, the second in a row following a few weaker quarters. Helping to demonstrate the volatility in both directions tends to even out over time.
Our Global Financial Solutions business continues to perform well and we deployed approximately 50 million into in-force and other transactions in the quarter, including deals in Asia. The transaction pipeline remains active and we are seeing good activity in all regions. Australia reported a loss in this quarter. While we were pleased to see the Australia Group business rebound and be profitable, the individual business underperformed. The underperformance in the quarter was driven by increased claims incidents and reduced terminations, and a fair amount of this negative experience is from closed treaties that we expect will run-off over time.
Our U.S. Group operations, which are part of our traditional segment performed well in the first quarter and our repricing efforts are proceeding as expected. The U.S. Individual Mortality business had slightly unfavorable experience due to a higher number of large claims in the quarter. We view this as regular volatility.
In summary, this was a good start for the year and as we look forward we remain optimistic about our business prospects. We continue to bring more solutions and value to our clients by leveraging our capabilities and the strong client relationships that we have developed around the globe. Business conditions remain favorable overall and we expect to extend our long track record of successful execution and continue to deliver attractive financial results. And now I'll hand it back to Todd to provide more detail on our results.
Thanks Anna, I will touch on a few financial metrics and provide some highlights on our segment results. Our adjusted operating return on equity for the trailing 12 months was 11% which is within our guidance range of 10% to 12%.
Our excess capital position at the end of the period was approximately $900 million. We continue to deploy capital into our existing business and enforced transactions and return capital to shareholders through dividends and share repurchases as appropriate. We deliver these results despite adjusted operating earnings per share, foreign currency headwinds of about $0.11 this quarter, primarily from weakness in the British pound and Canadian dollar.
The effective tax rate on pretax adjusted operating income was 21.4% for the quarter at the low end of our expected range of 21% to 24% primarily due to less impact from the guilty tax this quarter.
The average investment yield excluding spread business was 4.49%, up three basis points compared to the first quarter of 2018 as both quarters were positively impacted by variable investment income. We put the variable investment income impact this quarter at about $0.05 above our run rate. Our new money rate was 4.48%, up from 4.10% last quarter. We continue to maintain a high quality overall investment portfolio and have been selective with new money investments in the current environment.
Now, I'll give some highlights by segment. The U.S. and Latin America traditional business reported pretax adjusted operating income of $18.1 million, up from $1.2 million a year ago. Individual mortality experience was slightly unfavorable this quarter compared to the unfavorable experience a year ago. The experience this quarter reflects the higher number of large claims – was also negatively influenced by some client reporting items. The U.S. Group business performed well in the quarter slightly above our expectations and we feel confident that our remediation efforts are on track.
Reported premium growth was a little over 4% as we had a solid quarter in terms of new business. Our Asset-Intensive business reported pretax adjusted operating income of $59.6 million this quarter, above the expected range benefiting from favorable equity markets and new business.
Our Financial Reinsurance line reported pretax adjusted operating income of $18.3 million this period down modestly from a year ago.
Moving to Canada, the Traditional segment had a strong quarter with pretax adjusted operating income of $44.6 million. This reflects favorable individual mortality experience both in frequency and severity of claims. Premiums were up slightly on a reported basis and were up 6% in constant currencies.
Canada Financial Solutions reported pretax adjusted operating income of $1.3 million compared to $3.2 million a year ago. This quarter reflects slightly unfavorable longevity experience. In the Europe, Middle East and Africa segment, our Traditional business reported pretax adjusted operating income of $15.4 million slightly below our expectations. Mortality was unfavorable in the UK primarily due to some extra large claims. Currency negatively influenced the bottom line by approximately $2 million in the quarter.
Reported premiums totaled $363.9 million, down versus a year ago due to currency, but were up 8% on an organic constant currency basis. EMEA's Financial Solutions business, which includes Asset-Intensive, longevity and fee-based transactions reported pretax adjusted operating income of $35.1 million compared to last year’s $35.9 million. This quarter's results were in line with our expectations. Currency had a negative impact of approximately $3 million.
Turning to our Asia Pacific Traditional business. Pretax adjusted operating income totaled $36.6 million compared to $22.9 million in the prior year period. Our results this quarter in Asia, excluding Australia, experienced favorable underwriting margins in most countries across the region. Australia experienced a loss in the quarter approximately that of the last two quarters.
Reported Asia Pacific Traditional premiums were up 10%, reflecting a 14% growth in Asia, offset by a decline in Australia. On an organic constant currency basis, Asia premiums increased by 23%. Our Asia Pacific Financial Solutions business reported a pretax adjusted operating income of $3.3 million, up from $1.3 million in the year ago quarter.
New treaties generated a significant increase in premiums to $33.8 million in the current quarter compared to $700,000 in the year ago quarter. The Corporate segment reported a pretax adjusted operating loss of $19.8 million lower than they expected run rate due to recapture fee on a collateral financing transaction.
In conclusion, this was a good quarter and above our expectations. We are pleased that we have been able to deliver strong organic growth, execute on in-force transactions and return excess capital through share repurchases. The combination of these should allow us to continue to deliver attractive financial results over time despite some ongoing headwinds from lower interest rates and foreign currency.
Given our strong balance sheet, our excess capital position and high quality investment portfolio, we are confident that we can continue to be successful and achieve attractive financial results even in a more uncertain economic environment. We hope to see you at our Annual Investor Day meeting to be held on Thursday, June 6th from 8:30 to noon.
We thank you and appreciate your support and interest in RGA, and we'll now open the call for questions.
Thank you. Ladies and gentleman, the question-and-answer session will be conducted electronically. [Operator Instructions] We will take our first question from Jimmy Bhullar from JP Morgan. Please go ahead.
Hi. Good morning. I had a couple of questions. First on the U.S. Asset-Intensive business, I think you mentioned on the call that results benefited from the strong equity market. What do you think is sort of in the normal market, what's the expected earnings power of that business on a quarterly or an annual basis?
Jimmy, it's Todd. I think in the past, we've been guiding sort of that $50 million to $55 million range each quarter. Given some of the new business activity that we've been seeing, it’s probably trending towards the higher end of that range. As I think you recall as we add new business, that's definitely a positive, but also on the existing book amortizes off. But given our level of activity, we're still comfortable that $50 million to $55 million range and probably trending up towards the higher end.
Okay. And on the portfolio yield, it went up a few basis points, I think three basis points this quarter. Where are you in terms of your new money yields and the difference between those versus the yields on the maturing investments, just trying to get an idea when sort of – when you would expect your portfolio yield? Like, is this the beginning of a trend or do you expect it to decline through the rest of this year?
Yes, this quarter was actually pretty close and the portfolio yield is about 4.49%. And for the quarter, we saw the new money rate about 4.48%, so right. They were pretty close for this quarter.
And then just lastly on deals. It seems like you are optimistic about the pipeline. How is the competition for deals? And especially in the Asset-Intensive and the longevity market where it looks like there's more interest among competitors.
Hi, it's Anna. Yes, I would say that we are seeing a lot of competition right across the transactions portfolios. So not just Asset-Intensive, but the longevity and mortality. I would also say that we are seeing a lot of players, both established and relatively new. The level of competition, I would suggest, hasn't changed all that much. It's perhaps ticked up a bit. But not much has changed since the fourth quarter. Look, we're not changing our strategy. We're continuing to compete on expertise and counter-party relationships, track record and ongoing management and we have a track record of delivering on those deals.
Thank you.
We will take our next question from Andrew Kligerman from Credit Suisse. Please go ahead.
Hi. Good morning. On the U.S. and Latin America segment, you cited slightly unfavorable mortality experience. Could you quantify that? And given that 1Q is generally been the weakest quarter for quite a few years, how should we kind of project that out? Should we materially be projecting less favorable mortality in the 1Qs going forward? And if you could give a level, that would be great, too.
Yes. I'll start out, Andrew. Yes, so for the quarter, what we saw was some elevated larger claims when we compare it to our sort of seasonality expectations, and it was in the range of about $12 million unfavorable for the quarter on the mortality side.
And maybe I can jump in, Andrew, on your question about seasonality. So I want to step back a minute and just talk about volatility and seasonality because they are two different concepts. Seasonality is the reflection that more people will die in the winter months, driven by flu and the impact that cold winter has on most other causes of death. Look, it's a pattern, it's an observable pattern. We see this. You can see it in the general population in almost all countries. So that's a pattern underlying our business.
Now volatility on the other hand, it's a random variable. It is generally a severity event, and by that, I mean, when we see extra large claims. And it's generally short-term in nature, and we expect it to smooth out over time. So when we look at the performance of that business, claims is absolutely a key component. But you also have to remember that we are facing and have been facing interest rate headwinds.
So from an income perspective, there is that second element in performance. And to your specific question of how should you or how do we think about the seasonality, well, I would suggest to you, if you look at our claims experience by quarter over the last, say, 3 to 5 years, when you consider that longer period, that volatility, that short-period volatility that I spoke about, we would expect that to be muted. So by looking at those quarters over that longer period of time, we suggest that you can observe that seasonal pattern in our business between claims in the winter months and in the summer months.
Got it, okay. And then maybe just with regard to APAC, in particular Australia. It just seems to be a really challenging region for you for quite a period of time. So the question is, when do you expect Australia to stabilize knowing that the group market seems to have rebounded but now individual is underperforming? And is that a region where you want to be? I mean, maybe you completely exit or have you given that some thought?
Yes, Andrew. It’s Anna again. Look, we want to be in markets where the insurance industry is viable and long-term sustainable. And so we want to be in markets where there are fair prices, fair conditions for both the consumer and the industry participants. I mean, those are the type of markets that are attractive for us and that's where we expect to be long-term successful. Now we think the Australia market still has additional changes that need to take place in order to get to that type of market. We've seen more progress on the group side, but the individual side has been slower to develop. Now there's been distractions in the market lately that may have slowed down some of the needed changes. And what we're doing is, we're focusing on rehabilitating our business, and we're being very selective and very cautious on new business opportunities.
I see. And just if you could comment a little bit on what the challenges in individual that needs to change?
I think it's around the product richness, the product features, the product definitions. There's a lot of change that needs to take place, more change in the individual than in the group. I think the group has made strides in the last number of years.
Thank you so much.
We'll now take our next question from Erik Bass from Autonomous Research. Please go ahead.
Hi. Thank you. Actually wanted to stay on Australia. And I'm just hoping for maybe a little bit more details on the drivers. I think you said that the loss has been kind of high single-digit millions each of the three quarters, but the constitution of it's been a bit different between group and individual. So maybe if you could break down that into the two components. And then on the individual side, it sounds like it's an older in-force block. What's the tail on that block of business? How long will take to run off? And kind of what are your expectations going forward?
Yes. The underperformance this first quarter – and you're right, we're sort of the higher single- digit pretax loss was related to the – primarily to the individual DI business. And it relates – probably most of it relates to about four treaties, some of which as Anna mentioned are close to new business. So look, we do expect some time for that run off. It's hard to predict exactly the length of time. But if you were to ask me, what do we expect for the full year for the Australia business? We would still expect it to break even plus or minus a little bit for the full year.
Got it. So obviously it's still comfortable that this is just an earnings headwinds and not something that you're more worried about on a reserve development side?
That's right.
Got it. And then if I could ask one just on capital. You've been drawing down the excess capital over the past few quarters through both buybacks and block acquisitions. Is there a minimum level that you'd like to retain or a point at which you might look at the data securitization markets to kind of reload some dry powder?
Yes. We've always liked to maintain sort of a $300 million to $500 million excess capital, a buffer over time. That's what management is comfortable with. That being said, depending on the activity we see in the market and the opportunities and our comfort level and also the rating agency comfort level, we are willing to dip temporarily into that cushion knowing that we can replenish that capital fairly quickly just through our earnings generation. And we do have some – a little bit of leverage capability as well. So we've got some flexibility around that. And we could, if you wanted to, like we did back in 2014, tapped the embedded value securitization market.
Got it. Thank you.
We will now move to Humphrey Lee from Dowling & Partners. Please go ahead.
Good morning and thank you for taking my questions. Just to follow up on the U.S. Individual Mortality, Anna, I appreciate the color in terms of seasonality versus volatility. But based on what Todd mentioned, kind of this quarter is roughly $12 million unfavorable. So that would put the quarter kind of $30 million, and I think there is the out of period adjustment and maybe group was still a little bit tough going through the repricing.
So on a normalized number seems to be still trending to lower than kind of maybe 3, 5 years ago, the first quarter level. I presume that is reflecting the aging of the block. But I was just wondering if you can provide some color in terms of how should we think about the – kind of the Q1 expectations going forward?
I think you're right. We would expect seasonality to increase as our book ages, as it grows in ages. That's because we'll have more older people in that block and those are the individuals that are much more susceptible to the winter seasonal effects.
Got it. So basically just the seasonal impact is going to be more pronounced compared to several years ago. But how should we think about that change? Like that magnitude? Is there anything that you can kind of suggest as the block ages, like what percent of the block would become more original? Anything to kind of dimension the – I guess, the – a secondary derivative of the impact?
I would point you back over the last, as I said, 3 to 5 years. Our book has been aging and did age through that period. And so you can perhaps use that to help guide your views and your expectations.
Got It. Thank you. And then shifting gears to Asia. You've talked about you've got some new treaties for Asia Pacific Financial Solutions. I believe that's probably one of the notable role for that segment in recent years. Is there any kind of structural change in terms of the demand for that type of financial solution? Is there like a change in certain capital regimes? Or how should we think about the opportunities in that particular segment?
Yes. So I think we probably have mentioned in the past that we've been making a lot of progress using our Financial Solutions expertise and leveraging off our Traditional client relationships around the world especially in Asia. And I think this is sort of early going, we've added some – a small number of treaties that added nicely to the premium line this quarter. But it's hard to give you an estimate of what we expect that growth rate to be at this time. But we do think there's going to be some opportunities as we go forward.
So that is just more about kind of your efforts in the past starting to take a sure result as opposed to any kind of structural change in any capital regimes over there?
Humphrey, if I can jump in for a minute. We've spoken in the past about some of our Solvency II efforts in Europe. If you recall, when Solvency II came along, we created some solutions for clients. And over time, what we were finding is that those solutions were becoming attractive in other markets, when we combine them with product development and on a risk basis as opposed to a low risk basis.
So, I think what you're seeing there is progress we're making in combining the expertise in Asia, the product development expertise and then our capital expertise around helping to manage and optimize different capital frameworks. It doesn't have to be Solvency II. It could be any of the local statutory frameworks in any of those countries in Asia.
Understood. Thank you for the color.
We'll take our next question from Ryan Krueger from KBW please go ahead.
Hi, thanks good morning. In U.S. traditional, I was hoping to get a better perspective on your normalized earnings expectations at this point. I guess in 2016 and 2017 you did $375 million each year, last year I know it was depressed due to the flu season in the first quarter and the weakness in U.S. Group. So is there anything that you can, I guess help us to think through what you would view as a more normalized level of earnings on more of an annual basis at this point in that business?
Ryan, you mentioned the two items to really consider, that's the U.S. Mortality markets and the, and the Group line. And I think we've done –on the group line. I think we outlined sort of what we viewed as the sort of underperformance in the last year on the fourth quarter call. So I think certainly we expect that line to be back to sort of our expected profitability in 2020.
We're making solid headway as we mentioned in our comments on the repricing and a rehabilitation efforts. So that's all positive. And then I think, the mortality expectation, I think we do the best we can sort of describing to you where we think the positives and minuses are on the mortality experience. So it's really leveraging level in those couple of things out.
And then maybe just maybe one more comment to add, even though our traditional mortality markets business has been growing from a top line perspective, premiums probably in the 3% range, there's a little bit of headwind that offsets that with the interest rate environment that we've been facing. So little bit of premium growth offset by some of that interest rate headwind and then adjusting for the – as you mentioned the Group and the U.S. Mortality.
Thanks. I guess if I'd go back to what you said last quarter, I think – and add those up, it look like it maybe suggested U.S. traditional earnings power, once you got the group block reprice maybe in the $350 million range or slightly lower than that, is that a fair representation?
Yes, no, that's, that's a pretty close, I mean, yes.
Okay. Thank you.
We will take our next question from Alex Scott from Goldman Sachs. Please go ahead.
Hi, first question I had was just on Australia. I think since the last time you guys reported the Devereux Commission, like official document actually came out. So I'd just be interested to hear any takeaways you had from whether it was the amount sort of focus on the claims handling practices and then the impact that could have on claims reserves? Or any other observations you'd have about it that could impact the business?
Yes. So Alex, nothing's really changed. You're right, the report is out, but we're not – for what would impact our business, we don't see – we still haven't seen any direct impact on claims management activities or that kind of thing. There could be some indirect impacts. But we're not seeing anything significantly changed at this point. But certainly it's something we're going to keep an eye on.
Okay. And then a follow-up question is just, when you think about growth opportunities across the various regions, where would you expect to kind of see the growth focused? I mean, is it truly going to be primarily in Asia? Or are there more opportunities in your mind in U.S. and Canada? Then maybe the more near-term growth rates we've experienced would suggest? Any kind of color you can provide on growth and by region?
If I can, I'll start with Asia. I think you're right. I think that is a high-growth region for us. And I think we're well positioned from a competitive perspective and from a capabilities and skills perspective. And Europe, I believe that there are a lot of opportunities on the transactions side. This derisking of balance sheets, the pension derisking. I also feel that the organic opportunities are good in that region. And again, we have – well, we're well positioned, and we have the teams and the skills to be successful there.
In North America, so both U.S. and Canada, Asset-Intensive opportunities, mortality opportunities. If we take a look at the U.S. market in particular, we had gone through a very long period of declining session rates in a market that had single-digit growth in the underlying insurance. We've been seeing those session rates stabilize and starting to tick up. In part, we feel because of exclusive arrangements where reinsurers are helping insurance companies with some of these new programs, these new underwriting-based programs. So I see opportunities, we see opportunities, different opportunities but nonetheless, we see different opportunities around the globe.
That's really helpful. And maybe if I can sneak one follow-up on the U.S. program underwriting element that you mentioned. Is that something you're engaged in? Are you adding any partners there that are – anything notable?
Yes. I would say we're very active there. We are creating products, database products, scoring products to help our clients become both more efficient and more effective in the underwriting process. We've issued recently a few press releases around some of those partnerships. And we're also partnering with startups on the technology front to bring both platforms and underwriting products and solutions.
Thank you.
We will take our next question from Dan Bergman from Citi. Please go ahead.
Hi, thanks. Just on the progress in the U.S. Group business this quarter. I was hoping you could give some more color in terms of what you're seeing in the block's performance in the quarter and the drivers of the sequential improvement? And just any way to quantify the first quarter profitability? And then finally, in terms of the repricing process, any more details you can give in terms of how far along you are and the client response?
Yes. So on the repricing efforts, we're about 75% of the way through the repricing efforts and the rest of it be completed towards the end of this year. So we're very pleased with how that's progressed. And then as far as the experience goes, it was a little bit better than what we would have expected in the quarter. But albeit on a revised expectation from what we expect the full profitability can be once we get the entire block online and back on track. But we're quite pleased with how those efforts are proceeding. And just to gauge for the quarter, it was mid- to high single digit growth – profit in the quarter.
Great, thanks. And then maybe just following up on some of the block activity. I just wanted to see if you could provide any more detail on some of the deals you completed in the quarter? Kind of any color in terms of types of products, geographies or size of transactions that the deployment was heavily concentrated in, and the market has been most active in?
Yes. So we are deploying 50 million, roughly $50 million in the quarter, and the deals were in Asia, in Canada and Europe. And they covered Asset-Intensive, mortality and longevity. So I would say broad-based by risk and broad-based by region. And we continue to see interest on all of those continuing on through 2019.
Great, thanks so much guys.
[Operator Instructions] We will take our next question from Tom Gallagher from Evercore.
Good morning. Just few detailed questions. The favorable performance for each U.S. Traditional group Traditional group, was that mainly on the life that? Or was that disability where you saw some favorability?
For the most part across the – or the excess disability which was one of lines that misbehaved over the past – last year. That showed some good results this quarter. And then – no, there's actually four lines of business in there, and most of it performed pretty well. We were a little bit – if I remember correctly, we were little bit off on the excess medical or healthcare. But that was, I think, attributable to maybe one large claim.
Got it. And then, the – how should we think about the, I would say, most of the structure or the contracts on the individual mortality side? Is it mainly the severity that you cited, was that mainly quota share? Were you sharing in the risk? Or was that excess of loss contracts where the primary is retaining a certain amount and putting anything above a certain level? How were – in terms of the ones that are developing or what you saw, I guess, over the last several years maybe when you had cited severity. Can you explain which type of contract it's coming from?
Yes. It's a mix. So our business has both the quota share. So from first dollar, we share on a proportional basis with our clients. And it also has treaty structures where clients will retain a certain level, call that their retention level. And then we will take everything over and above that. On facultative business, which is a good part of our business, we take 100% of the risk. So the short answer to your question is, it's a mix.
Got it. And Anna, would you say the experience that you're seeing both this quarter and then that you've seen for the last few years, has the performance been different between the facultative versus treaty in terms of the experience?
Again, it varies. But I would say, overall, our facultative performance is good, has been good. And has – as has our automatic, and both have been good over the long term.
And nothing with recent experience where you've seen any trend change between the different types?
Not – nothing that we have identified.
Okay. And then just a question on the asset side. The $2 billion of other invested assets, can you expand on how much of that – just in terms of the allocation between private equity hedge funds and other types of investments, what kind of return those that – those alternatives had been generating? And what your expectations are for that portfolio?
Just a – maybe one clarification. We don't invest in hedge funds. These are really sort of real estate equity partnerships or debt and private equity – equity investments, that type of things. And we've been seeing some nice returns in the double digits on those investments.
Got it. Would – so the – of the $2 billion, is the majority private equity? Or is there – could you give any kind of broad cut at that – of that figure?
So I'm just trying to think through the top of my head, we probably disclosed some of that, and I don't have it at my fingertips in the 10-Q, but I want to say, on the sort of what we call the alternative investments, it's around $700 million, $800 million or so.
Got it. Okay, that’s helpful. Thanks.
That will conclude today's question and answer session. I would now like to turn the call back over to today's speaker for any additional or closing remarks.
Thank you everyone for joining us on our first quarter conference call and we hope to see you at our Investor Day in New York on Thursday, June 6. Thank you.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen.