BlackRock, Inc. (BLK) Earnings Call Transcript & Summary

My name is Lynn Bachstetter. I'm the Global Head of Financial Institutions here at S&P Global Market Intelligence. I'll be your moderator today as we talk about the state of the insurance industry. We have a great discussion prepared for you today as my colleagues from S&P will compare and contrast premium growth drivers for the U.S. life annuity and P&C sectors, including the impact of ultra-low interest rates, and discuss the implications of the life annuity sector's ongoing transition to capital-light business models. We'll also talk about future results of M&A activity. And Donald from BlackRock will review the impact of low interest rates on profitability and how that is driving asset allocation decisions. We'll conclude with Nicole from BlackRock, who will discuss the challenges faced by recent net-zero commitments made by insurance companies and the many ways to implement sustainability with the balance sheet constraints and in the absence of formalized regulatory requirements in the U.S. Now before we begin our discussion, I do want to go through a few housekeeping items. We have our resource widget, which will be accessible to you. Within this widget are some white papers, 2 of which Tim will probably be referencing throughout his remarks. Also, the slides will be sent to you after we conclude the webcast. In addition to that, we will have a replay in case you want to revisit anything we said or want to share it with a colleague. We ask you to keep this an interactive session. So we have some prepared remarks. I obviously, have some questions that I will be asking the panelists, but we're going to try to devote the last 10 to 15 minutes to live Q&A from the audience. So if you can just use that right-hand window of the Resource -- of the widget that says Q&A and enter your question there. We'll try to get through as many as possible. In the event we can't go through all of them, we will send the questions to the panelists to reach out to you afterwards. If you have any technical issues, we have someone on site to help us, so please submit those concerns as well. And at the end of the session, we will be sending you a survey. We use these evaluation forms to help shape the future of the events. If there's different topics or things that you think we can improve upon, we would love to hear from you. So now let's introduce our panelists. Tim Zawacki is a senior research analyst within Market Intelligence. Tim has covered the insurance industry in various capacities since joining SNL Financial in 1999. Currently, he authors the annual U.S. P&C market report as well as the Life and Annuity Insurance, which was both released this month. It contains historical overview and projections of industry results for key lines of businesses. He also writes a regular weekly column and periodic research covering topics that include P&C, life industry financials, M&A activity and the impact on the insurance sector. So great panelist for us to have here today. Donald Lin is the Head of Americas Insurance Solutions within the Financial Markets Advisory Group of BlackRock. The Financial Markets Advisory Group is a global team that provides a wide range of advisory, capital markets, mandate design, portfolio construction, portfolio management skills and analytical capabilities to its clients. The insurance solutions team has specialist expertise and experience in designing portfolio solutions for insurance clients. And last but certainly not least is Nicole Marchand. She's a Director and is a member of BlackRock's Financial Institutions Group within the institutional client business. She's responsible for developing and maintaining relationships with insurance and other taxable clients. I just wanted to highlight a few disclaimers. So during the discussion, the members of the BlackRock team will review the results of their proprietary Peer Risk Study prepared for the insurance industry. BlackRock's peer analysis is built bottoms-up, and they modeled 275,000 unique CUSIPs, equaling over $6 trillion in cash and investment. This includes the investment portfolio of over 500 U.S. insurance companies, and BlackRock captures through risk proxies, private investments, including private credit, commercial mortgage loans and alternatives. For the purposes of this webcast, the BlackRock team has aggregated the analysis into industry segments. But more commonly, BlackRock shares the results with insurers at the company level, allowing for strategic discussions around asset allocation and how the decision each insurer makes translates into income generation, portfolio risk, capital consumption and potential stress scenarios. So with all of that being said, I would first like to turn it over to Tim and Don. They're going to go first through an outlook of the P&C sector. And then we'll shift gears to life. So Tim, I'm going to start with you first.

Thanks a lot, Lynn, and thanks to everyone joining us on today's webinar. When we were first planning this event going back a couple of months, we were in a period where it was conceivable that we'd be speaking about the COVID-19 pandemic or at least the governmental responses to the pandemic in the past tense. But as we all know, the events of the past few days and weeks have shown that maybe our enthusiasm was premature. As we look at the U.S. P&C industry, there are signs that we've moved beyond the pandemic in some respects. But in others, it's clear that COVID-19 remains a driver of both corporate results and near-term strategies. Expectations for higher interest rates, as we'll discuss today at length, are increasingly distant in the rearview mirror. Financial inflation, whether it's transitory or you consider it to be otherwise, is impacting claims and underwriting expenses. Yet as we look ahead to the balance of the year, there is a constant looming over our outlook, and that's the frequency and severity of natural catastrophes. As always, they'll play a significant role in determining the P&C industry's fate from an underwriting perspective. Western wildfires have emerged as an omnipresent threat, and the related concerns are heightened this year by weather-related dynamics. Hurricane season in the Atlantic is underway, and the most active period is ahead of us. The return to normalcy from pandemic era trends also looms large in our forecast. We've seen a number of private auto carriers report increases in the frequency of claims from 2020's historical lows. And this is occurring at the same time inflation in automobile repair costs and, in particular, used car values are placing upward pressure on severity. The private auto business produced a historically favorable combined ratio of 92.5% in 2020, and that played a significant role in leading the industry to a 98.7% combined ratio across all lines during a year when many of the other lines of business in the commercial lines were unprofitable on an underwriting basis. How quickly that private auto result returns to more normal levels will greatly influence whether and the degree to which the P&C industry will produce an underwriting profit in 2021. Now the June results from Progressive, which came out last week -- Progressive is, of course, the #3 auto insurer in the U.S. and #1 commercial auto insurer -- suggests that normalcy has returned with a vengeance. The personal auto combined ratios that the company reported in its direct and agency channels sorts their highest level in recent memory during the month of June. After the second quarter, Progressive reported a 47% year-over-year increase in incurred claims frequency in its personal auto business. Now of course, that's coming off of very low levels. The other end of the spectrum, we've seen carriers submit rate filings in which they continue to adjust frequency trends downward from pre-pandemic levels given their expectation that hybrid work will become more prevalent and commutes will become more infrequent relative to what was normal in 2019 and before. Our annual P&C industry market report, which Lynn mentioned, is available to download to viewers of today's webinar, calls for a combined ratio of below 100% for a fourth consecutive year. We're assuming a gradual return to more normal results in private auto through the balance of 2021. We're also anticipating the stronger growth in premium volume for the industry in nearly 2 decades. We really expect the convergence in the coming years between the underwriting results in the private auto business from those unusually profitable and unsustainably profitable results in 2020. And then we also expect improvement in some of the commercial lines that have been struggling in recent years. The latter is more of a story about top line trends. Carriers have moved aggressively to adjust pricing into professional lines and other businesses hit hard by social inflation. The industry had been suffering from rising costs related to litigation on long tail lines and in some markets, such as the Florida property market, short tail lines. And that's long before the upward trend line in consumer inflation began to grab headlines. The industry will also benefit from easy comparisons in the private auto business on the top line. Many carriers accounted for their COVID-19 policyholder credits as a reduction in premium last year. Looking beyond 2021, we should presume the industry does not view inflationary trends, whether they're financial, social or otherwise, as transitory. And companies will continue to pursue aggressive responses in both pricing and underwriting for the rising costs they face. With interest rates so low, the industry has little choice but to continue to pursue and maximize underwriting profitability. With that, it's now my pleasure to introduce Don Lin from BlackRock to provide a deeper dive into P&C industry dynamics. Don?

Thanks, Tim, and thanks, Lynn, and thanks, everyone, for joining us today, either live or on the recording. So perhaps we will start our analysis and kind of continue on the themes that Tim just kind of alluded to with more focus on the investment lens. On this stage, what we are trying to illustrate here is some of the things that Tim has been highlighting on this section. When we look at the profitability of the P&C insurance industry over the last 5 years and kind of look forward as well, given our market outlook and the embedded book yields within the P&C insurance industry, we do see a more challenging environment or potential for a more challenging environment for P&C insurers. Ultimately, when you look on the 5-year total return on -- return on average surplus on the left-hand side, which is our view on profitability, you can see that over the last 5 years, the industry has averaged around 9% ROAS. In aggregate, you can kind of see fairly consistent across commercial, personal and workers' comp. And one of the things in terms of the attribution of it, you can certainly see the operating component of this, which is the sliver in orange over there is a small component of it and where the driver or the primary driver of profitability has been really coming from investment results. In the middle section, you can kind of see, well, what are those drivers and investment results? And how have they come through, and perhaps looking through a lens feature in terms of how they can kind of portray out over the next 5 years? So over the past 5 years, investment returns have averaged 5%. And with investment leverage of around 2x, you can kind of see that's how insurers have been able to generate around 11 points of ROAS relative to the 5-year average. Now this is driven by a combination of strong embedded book yields. You can certainly see in the orange the strong NII component there reflected in the margin. But -- and you can certainly see also strong investment returns and strong total returns with the green and purple, representing both the unrealized and realized gain losses that insurers are taking within the investment portfolio. Looking forward, however, we see an environment where we could see much more muted returns. The combination of book yields converging to market yields and a view that we could see higher rates leading to unrealized losses are 2 views where on the investment return component, you can see much more muted returns relative to the past. With this, what is clear is that what has worked in the past will no longer work in the future. And we see this on the right-hand side. In aggregate, in 2010, the P&C industry, just the NII component of their returns, was able to contribute almost 10 points to ROAS. When you look at the P&C industry in 2020, that has dropped to 7 -- just under 7%, given declining yields. And if you were to take the current environment and where the market yield is today, that gets further decline to about 3% in contribution. So in aggregate, given the market yield environment, it's no longer possible to kind of have the same contribution that investments has as in prior years and prior regimes. And as we go through the deeper analysis of the investment portfolio for P&C insurers, we can -- over the next several pages, we're going to see that the many insurers are combating this environment by introducing more private assets, number one; expanding their cool into core plus fixed income sectors; and going down in quality. And we believe we can certainly continue to see this trend moving forward as well as growth in alternative assets to help buoy these returns. Now on this next page, we look at asset allocation. P&C insurers generally hold publicly traded fixed income as their core holdings in their investment portfolio. These are generally higher quality investment grade, predominantly investment grade with an average duration of 4 to 5 years. While we believe that public fixed income will remain a core holding in an insurer's balance sheet, we don't see it as a ballast for supporting book yields in today's environment, and insurers are increasingly looking into private fixed income and growth assets to support returns. And you can see a little bit of this in the middle chart, where there's been a very clear pattern over the past 5 years of insurers' preference for private assets, including private fixed income. This is represented in the Tan. Overall, we see this as a rotation for -- as a preference for more income-enhancing yield. In our view, many P&C insurers have adequate liquidity in their portfolios, and the shift into a more illiquid sector for income generation is certainly balancing their need for yield. And certainly, we also see P&C insurers lean into private credit and alternatives for income generation as demand for PE and infrastructure equity also are on the rise for those seeking return. Overall, within alternatives, private credit has seen the fastest growth from U.S. insurers across alternatives at over 280% since 2007. We've seen this focus in direct lending, looking at senior secured, predominantly first lien loans. We've seen interest in mainstream investments, looking -- as we look outside of their core fixed income portfolios for enhanced income build. For those seeking retires or perhaps seeking more book value per share growth, we continue to see strong demand for private equity, particularly growth equity investing and expanded opportunities in PE secondaries as well as infrastructure equity. Finally, another use of the alternatives bucket is towards ESG strategies. And Nicole will touch upon this in a bit. But in our view, ESG is here to stay as countries, companies and individuals consider their role in this low -- in a low carbon transition, which presents us a lot of discussions around renewable energy investments. And additionally, insurers are highly focused on changing patterns around social justice and making strides in investments towards these goals as well. Now over the next 2 pages, we're going to go a little bit deeper into the positioning and rotations within the public fixed income portfolio. While the trend has been rotations out of public fixed income in search of yield, we still expect public fixed income to remain a core allocation for P&C insurers and for insurers to continue to look for ways to optimize their allocation here. The challenge here is apparent on the right-hand side, if you look at the differential between book yields and market yields. Overall, current investment portfolios as of year-end '20 can support NII of approximately 3%. But as the existing portfolio runs off, the market yields that would be reinvested within public fixed income are more like 1.5%. So ultimately, the question becomes, where are insurers looking to allocate? And which brings us to the next page. We are seeing increasing interest on securitized and core-plus assets. These are areas we think P&C insurers can lean into for more yield. The overall book yield of the public fixed income portfolio is 3%. And we can see predominantly in emerging market debt and high-yield securities book yields in excess of 4%, which is a source of income. And we also see securitized as a ballast of high-quality asset classes generally, call it, AA and above, a yield of 2.6%. So they provide the barbell approach to kind of to present a combined solution where you can kind of exceed your traditional book yield of your current portfolio composition. And lastly, before I turn it back over to Lynn, we talk about our risk asset allocations across the P&C industry. Overall, P&C insurers have an aggregate allocations to public and private equity real estate and private fixed income. The trend is clear in the search for income as you look on the right-hand side in terms of more private fixed income, which has occurred over the past 5 years. In the future as we look forward in terms of our capital market expectations, we continue to see more of a push into private fixed income as P&C insurers get comfortable with taking more illiquid risk. We also see a potential for more growth in Schedule BA assets, again, in the asset classes that I alluded to earlier, direct lending, private equity for growth and infrastructure equity for growth as well.

Great. Thanks, Don. We were able to hear you, but I think your screen froze, so if you want to refresh while I ask the question to Tim and jump back on, that would be great. So Tim, I know that in your opening remarks you talked about inflation. So in your view, like, where do you see inflation impacting the P&C industry most significantly?

Well, I mean the obvious headlines have been in the areas of lumber and other related building materials and used car prices where the trend line has just been to the moon, to use a recently relevant term. The homeowners' policy in many ways for companies with the limits on those policies provide protection to the insurer against inflation. There's also annual adjustments and replacement costs that allow companies to automatically embed the effects of inflation in their pricing for the coming year. So that's one of the reasons behind our expectation for rising premium growth in the homeowners' line is not necessarily because there's such a push for rate increases, but because individual policies, average premiums per policy is likely to rise as these higher materials and labor costs get absorbed. The used car prices is an area where if you have a total loss that it certainly would be an impact for the auto insurers, both personal and commercial. The shortage of chips and the delays in manufacturing has really created a supply-demand imbalance in the used car market. Now we would expect and most of the economists we listen to anticipate that these increases are in fact going to be transitory in these particular areas. But our expectation is that social inflation isn't going anywhere. And if it is going anywhere, companies are certainly going to be very conservative in assuming otherwise because they've just been hit so hard for several years on rising litigation costs. And to the extent it has been out of the headlines of late, I think with each passing week, there's news of settlement -- talc is the latest issue with Johnson & Johnson. These risks are not going away. Core dockets are not being pushed back to the extent they were a year ago, and companies are -- in professional lines and other long-tail commercial lines are going to be aggressive in pushing for rate to assume they have margin to address these persistent risks.

Excellent. Thanks, Tim. Okay. We are going to segue now into the life sector space. So I think we'll go same run of show, Tim, you want to start us off what you're seeing and then let Don follow up what he's seeing on the investment asset side.

So as Lynn mentioned earlier, we also just this week issued our life and annuity market report, and one thing to note when we're talking about that report in our outlook for the overall industry is it does include the accident health business that's written by life insurers. And this is a pretty decent chunk of business, somewhere between 25% and 30% of overall life industry premiums. And some of that is in traditional employee benefits business like disability income and supplemental health, but it's also in areas like major medical and Medicare that people don't necessarily associate with life, annuity and health business traditionally. So this does impact our overall forecast. The overall growth rate we're projecting for this year in these lines is 2.6%. Not an especially exciting number when you look at it on the surface, but it's more than double the 1% growth that the industry achieved on a direct basis last year. And there really are a divergence of outcomes across product lines that we anticipate. And a lot of that has to do with not just current macroeconomic dynamics around things like interest rates, investment portfolios and such, but also around the comparisons to 2020 that really were unusual in several respects. The persistence of low interest rates means that our near-term outlook for the industry may not be necessarily as optimistic as it might have been going back 3, 4 months, but our enthusiasm about consumer demand for the sector's products really is unmoved at this point. So as we look at our overall projection here for '21 and for '22, an acceleration in growth we project for 2022 for a variety of reasons. It's important to call out that this does not necessarily provide an indication of our near-term enthusiasm for trends in the individual life and annuity businesses. As many people may be aware, the direct premium growth rate in the ordinary life business in the first quarter were quite spectacular, a 14-year high for first quarter's growth rate in that business. And the LIMRA surveys that have come out for trends in April and May have suggested that the momentum has only continued into those months. It's only a couple of days away from when we'll be hearing more about trends from individual companies in their second quarter earnings reports, but it seems like the trend line there is upward. Strong consumer demand for life insurance in the pandemic era, a time when personal balance sheets have been strengthened by government stimulus payments. Our bank research analyst, Nathan Stovall, has put out a number of reports talking about how deposits are at record high levels at U.S. banks, for example. It's really an ideal environment for selling a life insurance products. And that's in stark contrast to last year when there were a number of factors weighing against sales of the product, being able to conduct paramedical exams to underwrite a life insurance policy was challenging at times. It remains to be seen how much of the first quarter's momentum that the industry will retain through the second half of the year. Our outlook is spread at about a 5% growth rate. Again, that number doesn't really jump off the page. But if you look at history, it should. There's only been 2 times in the last 20 years in which ordinary life direct premiums have increased at levels approaching 5%, and they have not yet hit 5% going back through 2002. The most recent near miss was in 2019 when there was a change in mortality table spending that caused a pull-forward effect on sales. In the ordinary individual annuity business, we're projecting the industry will bounce back from last year's 5% decline with growth of nearly 7% on a direct basis. We expect that the industry's business volumes will increase by double-digit percentage for a third consecutive quarter in the second quarter when those results become available. The comparison to the second quarter of last year is quite easy. There are a number of companies that pulled products temporarily from the market or we're not actively underwriting during that time. So production was quite low in the second quarter of last year. Interest rates, of course, remain a big headwind for this industry, and the comparisons do get tougher as the year proceeds. The group annuity business, I should call this out as well. It's had a significant impact on both historical results and our forecast. The pension risk transfer business is a big driver of growth rates there. Trends in the first quarter were especially slow. There had been a lot of enthusiasm around the industry for a great acceleration in activity, but the stars may not be aligned there because of what we've seen from an interest rate standpoint. And in last year's results, the first quarter had a really unusual amount of group annuity premium produced, which makes for a really difficult comparison. In fact, that growth in the first quarter of last year in the group annuity business made the difference between a decline and what was an increase in overall life and health industry premiums last year. So against this backdrop, we found the industry really focused on life and annuity in a significant transition. Some have gone so far as to call it transformation. Companies have accelerated reviews of alternatives for their in-force blocks of business at a time growing array of solutions providers have emerged and they demonstrated significant enthusiasm for taking on a lot of that risk. Principal and Prudential Financial have announced the pursuit of more capital-efficient business models focusing on products less sensitive to interest rates. Others have entered arrangements to share risk through flow reinsurance on new business. New reinsurers and other vehicles have voiced their interest in a growing array of liabilities beyond the traditional Triple X, term life and fixed deferred and indexed annuity business that have historically characterized their appetite. The report that we put out yesterday lists almost 20 of these providers that have either shown a record of engaged units in these transactions at a large scale or expressed an interest in doing so. And undoubtedly, there are others scouting out the market for potential opportunities. We have focused much in the report on net business trends in the industry, and these reinsurance transactions are a big reason why, particularly in the ordinary individual annuity space. We've seen a real divergence between direct and net premium trends. When business goes through a reinsurance transaction from a domestic entity to an offshore entity, that business no longer is within the scope of our NAIC statutory data. So last year, for example, premiums were down by 8% across the industry on a net basis even as we had that 1% increase in direct business. And the large increase there in ordinary individual annuity seeded premiums that you see on the graph there was a big reason why. There was, of course, the landmark deal last June between Athene and Jackson National Life where fixed annuity business was ceded from a U.S.-domiciled entity to a Bermuda affiliate of Athene. In other cases, today, we have the announcement of a large transaction where Great-West, the Empower Retirement business there, is acquiring the full service retirement business of prudential and there is going to be a reinsurance component of that deal. If history holds, that business, at least a portion of it, will remain within U.S. entities so creating volatility among the individual filers but not on the industry basis as a whole. And so while statutory based balance sheets and income statements show significant effects from the entry, exit and recapture of reinsurance agreements, there are ways on statutory filings to get a view as to what the industry's results would look like gross of those transactions. And here, this graph shows a steady increase over time in the share of liabilities subject to reinsurance arrangements. Net liabilities at the industry level exceeded $7.5 trillion at the end of 2020. Adjustments due to reinsurance exceeded 11% of that amount or about $950 billion last year. That is a new high, as you can see. I think we'll see that number continue to rise, especially as the supply and demand dynamics favor more of these transactions near term. With that, I'd like to once again bring Don back. Don?

Thanks, Tim. And I hope you guys can see me now. So on the investment side for the life and annuity industry, I think the main challenge is the low rate environment we continue to be in. Each insurer is competing to support their current policyholders by finding attractive reinvestment yields for their in-force block of business and also competing to grow their business through by offering a competitive crediting rate on new products. In a world where rates are near historical lows and an ability to source attractive yields via public markets is rather challenging, so on this page, we illustrate some of these dynamics. We've seen the income on the investment portfolio drop by over 120 basis points since 2004. You can see this on the left-hand side. And as a result, net spread earned, which is a profitability metric we use using the statutory data, we see that estimate of the insurance liability yield, which is the investment -- net investment income minus the, call it, estimated liability yield has declined by over 40%. As you kind of fast forward a little bit, the future investment landscape is equally challenging, given we still remain in a world of low interest rates. Ultimately, the analogy I would give, it's like gravity in the sense that that orange line on the left-hand side, which represents NII yields will continue to converge towards where achievable market yields are today, which is lower. Overall, the life liability yield will have challenges in kind of continuing to converge down unless a lot of life insurers will come up against some minimum crediting rates on old products or legacy lots of businesses that have been sold. The right-hand side actually illustrates the valuation of life insurers going back to 2001 using price to book as a metric. And overall, as of year-end 2020, valuations are still below pre-global financial crisis levels, but they have recovered significantly since March of 2020. Overall, I mean when you think about what happened in 2020 in terms of valuations, we had a low of 10-year treasuries at 75 basis points, with the potential to actually go negative. And the question around there and where you see the valuation coming into play is that the question was could the insurers survive? Their business model was being, call it, reevaluated at a time of such low interest rates. Now we've certainly seen a bounce back up in rates since then. And you can kind of see the valuations improve, but still, I think the question becomes now is how are -- it's not a matter of survival for insurers. It's more of a matter of basically how their asset strategy can be differentiated in a world which then basically that can enhance yield, but balance it with the overall risk and overall ALM considerations that insurers need to be mindful of. And on this page, I think this -- a picture generally can tell a thousand words. What we show here is the dotted line, the light dotted blue line is effectively where the life industry book yields are today. The challenge within the public markets today is that when you look across the curve, look across sectors, even look across credit qualities, it's extremely hard to put together a strategy or a public fixed income strategy that will stem the NII erosion that is occurring in every insurer's investment portfolio, right? And so we certainly see -- and you can kind of see this in some of the comments that Tim said, we certainly see a trend towards some of the more newer entrants, maybe the private equity stacked entrants, which have a differentiated strategy, generally away from public fixed income to kind of generate some enhanced yield potential relative to, I would say, legacy blocks of businesses but also being very competitive in new business as well. Now similar to the P&C industry, this is actually now -- what we do look -- we take a look backwards to kind of -- to see what could come as you kind of look forward in terms of our market views. On the left-hand side, we've taken the NII generation potential of the life industry and cohorted it to 2 ways. One, by what are the sources of NII yield by industry? But then we also cohorted it within the industry group, so the life industry between top life, mutuals and PE-backed sponsors. From this, you can see that they're starting to see a differentiation between your traditional life insurers and your PE-backed sponsors. In aggregate, you can see at the industry level, as of last year, as of 2020, the life insurance industry was able to generate a 4% NII yield, and the PE-backed sponsors were able to generate 40 basis points of enhanced yield above that. Overall, when you kind of look at what is driving it, you can see on the right-hand side, the asset allocations. PE-backed sponsors have leaned into having the illiquidity trend. And we certainly see an increase in private assets from that side supported by some of their investment strategies in some of their, call it, portfolio construction techniques where they've been more comfortable in increasing that illiquid allocation, perhaps, relative to some of the more traditional life insurers. And moving forward, I think this is going to -- if we kind of double-click within the public fixed income allocation, you're going to basically see...

Sorry, we're noticing that Don is frozen again. So I think he's just is going to refresh this browser. We'll keep him going. We could hear on audio, it's just that his face is frozen. Let's just give him a second to come back.

Sorry. I was just refreshing my screen. Are you able to see me now?