Palomar Holdings, Inc. (PLMR) Earnings Call Transcript & Summary

Good afternoon. I'm Tracy Benguigui, insurance analyst at Barclays. I'm pleased to host our fireside chat with Palomar. Our speakers are Mac Armstrong, Chairman and CEO; and Chris Uchida, CFO. We have a lot to cover. I'm going to kick it off to Mac for some opening remarks.

Terrific. Good afternoon all, and thank you, Tracy, and the Barclays team for hosting us today. We're thrilled to be here. I am Mac Armstrong, the Chairman and CEO of Palomar Holdings. We are a specialty insurer based in La Jolla, California, and I'm joined by our CFO, Chris Uchida today, as Tracy pointed out. Palomar focuses on finding dislocated and orphan segments of the insurance market where we want to deliver and provide innovative insurance products that are built around analytics and analytics we form underwriting, technology-enabled delivery and through reinsurance. We offer our products on both an admitted and an E&S basis. Over the course of '21, we have focused on 4 key initiatives that we believe will create value this year and more importantly, beyond. And it started with continuing to drive very strong top line growth, if not industry-leading, certainly top decile. And I'm pleased to report that we have grown for the first half of the year, over 50% and including strong growth in nearly 30% for our bellwether earthquake business. Secondly, we have been very focused on building out our E&S company, Palomar Excess and Surplus Insurance Company. We launched that business around a year ago this time, it was in August of 2020. And similarly, we have seen good traction. We are now a close of -- on a $130 million run rate as you exited the second quarter. And it's a nice combination of property business as well as some new emerging categories that will diversify the book. Thirdly, we wanted to continue to enhance our underwriting efforts and our risk transfer efforts to ensure predictable and consistent earnings. And while these actions take time to manifest themselves, they do bear fruit, and they position us very well in the years to come. And I think that's most best typified by the fact that the combination of these efforts is well -- both underwriting and reinsurance has allowed us to put an ROE for, for 2021 of 11%. So we don't see a circumstance where the ROE this year is less than 11%. And obviously, our goal is to exceed that considerably. And then lastly, we continue to invest in systems, talent and risk transfer as well as some as well as new products to not only drive growth this year, but more importantly, sustain our growth for the indefinite future. So that's really kind of Palomar, where we are today, where we're looking to go. And so with that, I'll hand over to you, Tracy.

We're going to touch upon a lot of those themes. I didn't mention earlier our housekeeping comments, there is a question box you could hit or you could send me an e-mail and make entertaining questions at the end of the session. We also have our audience response system, we're polling questions, and that's the survey button. I'll just read out loud those polling questions, and then we could revisit that later in the session as we get more responses. The first one, Palomar's gross premium growth was 54.4% in the second quarter of '21. My gross written premium growth expectation for Palomar in the second half of the year is one, above 50%, two 30% to 40%, three 20% to 30 % or four, below 20%. The second question is basically just the iteration of that. It's the same options just the growth expectation for full year 2022. With that, we'll jump into the prepared questions. And again, towards the end of the session, we would love to take audience questions. The first question I have for you, speaking about your second quarter premium growth of 54.4%. How would you characterize the order of magnitude for each of the following premium contribution drivers? Was it really more rate increases, higher submission volume into existing business lines, greenfield operations or underlying economic growth?

Yes. It's a very good question, Tracy. And I think it was really a combination of those 4 categories. Obviously, we grew very rapidly, 54% rate was a contributor to it, but not as meaningful as it may have been for other operators. So rate increases for us on the commercial side of the business were in the mid-teens. Commercial earthquake was 40%. Our large layered and shared kind of builders risk business was around 21%. But most of the business is coming from exposure and new business. And if you put it into a line like residential earthquake, we grew mid-20s, and we only have a 5% inflation guard that kicks in year-by-year. So it's really driving new -- it's new sales and new distribution sources as well as some new partnerships that are allowing us to grow in our largest line of business. Our Hawaii Hurricane business, we doubled our policy count. That was a function of submissions as well as some rollover business that we acquired. And then lastly, as we are the only A- or A.M. Best-rated entity that's riding monoline Hurricane Hawaii kind of become the only preferred option or high-value option in that market. So greenfield is a contributor. That's a good example of that would probably be in some of the new partnerships we've done in our inland marine line of business or our real estate E&O. But those are really -- they're starting to make more meaningful contributions, but those are still pretty nascent in terms of where they are in their development cycle. Underlying economic growth is probably the least impactful. That real estate E&O program is probably being a beneficiary of it, but it's a $3 million run rate right now. So I think for us, it's really new distribution, new exposures and the rate are the primary drivers. It's the first 3 for us.

Got it. Yes, you basically were seeing a little bit of everything. So if we can also intact higher submission volume into the non-admitted market. What is driving this ebb and flow at this point in the cycle?

Yes. I think for us and where we are going and the majority of where we are participating in the E&S market right now is property-driven. It's commercial earthquake. It's builders risk, and to a lesser degree, it's just commercial property or wind exposed property. And so that tends to be more capacity pullback. And so I think for us, it's more capacity pullback from other E&S markets, maybe Lloyd's being one example. And then another one would potentially be just a rotation out of the standard market by someone -- I'll give you an example in high-value residential earthquake, which we're right now on E&S basis. AIG decided to pull back in high net worth homeowners in California earthquake in altogether. So that's an opportunity for us to come in. So again, it's really more for us, capacity that's driving it.

Got it. And then what proportion of your policies you write on inflation-sensitive exposure business? So basically, as inflation goes up, the premiums go up commensurately for that bulk of your policies?

At this point, not a lot of our business is written on like a revenue basis. It tends to be more of the structural value. Now with the majority of what we're doing, call it, 90% of the book is property in nature. So only a handful would be tied to revenue or sales or headcount. It's really a modest amount. What we are doing -- and even in those lines, it tends to be more short-tail business, even real estate E&O and they're not to harp too much on the small line of business, but that tends to be even shorter-tail business. It's not long tail, like you might see for certain professional lines or workers' compensation. So the short-tail nature of our business really informs the inflation impact, too.

That makes sense. But maybe just sticking on inflation, it may not also affect losses. So do you have a view on whether inflation sort of transitory or not?

Yes. When you look at inflation for insurance products, it varies. There's COGS, your cost of goods. It could be medical inflation, it could be other or it could be social inflation adjustments. Our inflation exposure tends to be more COGS-oriented. So you're looking -- for us, it's been scarcity of labor and the cost of raw goods, in particular, like highway. So because our -- again, short-tail property focused, that does somewhat limit our inflation exposure to purely just the COGS side. So I think for us, it's probably a bit transitory and not a long-term dynamic. And it's certainly not one that over 4 or 5 years, the loss exposure could build because of the delay or the inflation associated with the indemnity.

It's very helpful. Let's get into your products and start with California earthquake, as you mentioned, is your bellwether product. Are there any secular changes going on that may lead to more growth?

Yes. Tracy, I mean, I think you and I have talked about this in the past, but there have -- there are some considerable secular positive dynamics for us and earthquake right now. It starts with really the dislocation in the California homeowners' market, that's really being driven by wildfire losses. And 2021 has remained a pretty active wildfire season. Fortunately, so far, there's not been material structural damage, but there has been some. But I think what that is leading to is people continuing to want to pull out of the California homeowners market. And so when policies are nonrenewed and there's an earthquake policy attached to us, we have been able to go after those policies and have done a good job of converting them. Similarly, as member companies of the CEA nonrenew their book, the California Earthquake Authority can only offer a companion earthquake policy to a member company or a member company insured. And so as the CEA companies participate insurers not review their policies, they come back into the open market as well. So that's been a nice beneficiary for us, and that's led to strong partnerships. It's led to increasing distribution and it certainly, led to new business sales. And I think it's important to point out that, that dislocation in the homeowners' market is going to persist certainly into 2022 and potentially and beyond. And then the third thing that I would say is that I think the CEA is taking a hard look at its exposure and how much business it can take on. It is the behemoth in the state. And they -- I think their writings alone add up to the remaining 9 members of the top 10 in the market. So they have come out and say they are exploring, reducing their coverages and the amount of limit and their deductible options. And that's something that the APCIA has pointed out, and I think it's something that's up for discussion at the CEA's next Board meeting. So I think that's something that could be a good catalyst for us in the near term, too, as they pull back their coverage to try to reduce their exposure.

That's very helpful. Could you walk us through the process of entering greenfield operations? I guess that started off on the catastrophe adjacencies, but now you're dovetailing out to casualty lines. And specialty -- especially on the casualty side, these businesses are not commoditized. How do you feel about your underwriting bench strength? And how dependent are you on MGAs to underwrite your business?

Yes. Let me start by saying we're very excited about the casualty initiatives that we have underway. And we have made considerable investments and particularly on the talent side to help us execute those plans. Because you are right, there is a specialization in a line like professional liability or excess casualty. And so what we are trying to do is find underwriting talent that we can bring in-house where we -- that we can bring operational expertise behind them. And so that might be systems. It might be reinsurance acumen. It might be distribution relationships. But what we're going to want to do is allow these new leaders to develop their products, capitalize on market trends that -- or dislocations that where we see -- where we have identified and then, again, bring those operating resources to bear behind them. As it relates to the second part of your question on how we use MGAs, I think we have developed a strategy that we have used an earthquake, we use in builders' risk where what we're going to try to do is develop an underwriting box. And if we develop that box and we have these guidelines in base, we are somewhat agnostic on how we aggregate the business. So we would work with an MGA. We'll work with retailers. We might work with other insurance carriers. And so that's what we have done and builders' risk. And so a good example of that is builders risk is led by a gentleman named [ Robert Brierley ]. Robert writes that directly in-house to retailers and wholesalers. He's also partnered with other insurance companies like Pure, to write -- to go out and target the high-net-worth builders risk market. And then similarly, he has developed an underwriting framework to put out layered and shared limits with Ryan Specialty in their technical risk underwriters facility. So we'll work with MGAs and in segments where we're also writing in-house because it's the same underwriting framework, it's the same reinsurance program. It's just another distribution mechanism for us.

Got it. Could you describe the competitive landscape, what proportion of submissions are flowing in and out of large established carriers? Has start-ups and scale-ups been making any meaningful dent on your business prospects? And how well capitalized do you think these structures are relative to your capacity?

Yes. So for us, what I would say is as we talked about earlier -- where we are going into markets, there is a capacity constraint. There are needs. And some of that might be informed by Lloyd's. I think Lloyd's is still same they are in the period of exposure reductions and optimization of their book. Some of that might be a larger company just pulling out of certain Catlins, like I referenced an AIG point out of residential quake. So for us, it is really a capacity circumstance that we are capitalizing on. There are new entrants in some of those segments. We look at like the insurer tech market. They tend to be going after bigger market opportunities like homeowners or even private passenger auto. We'll partner with them, though. So we can be a product specialist and these newer market entrants. We can be an earthquake offering. We can be a flood offering. We can be Hawaiian Hurricane offering, which allows them to focus on their core competence and provide a broader product suite maybe generate a modest amount of fee income while we're taking on the risk for kind of our bread-and-butter lines like hurricane and Hawaii flood and obviously, earthquake.

Got it. Also most investors' minds are such a heavy catastrophe quarter. And I recognize a lot of the re-underwriting efforts you've made, particularly exiting homeowners in Louisiana and basically your all-risk nationwide cutbacks. So how do you feel about those re-underwriting actions? Do you think that materially reduced some of the Ida losses? And if you could just speak more broadly on what you think about the storm.

Yes. So with Ida, you -- as you've touched upon, we did take a decision last year to pull out of Louisiana in the homeowners' market as well as on the admitted All Risk side of the business. And by the time Ida hit, we had reduced our exposure in the commercial All Risk segment by 80%. And the homeowners' book, we were less than a couple of hundred policies. So overarchingly, Ida, we will have losses there. But if it would happen a month or even 2 months later, we would have had -- almost all of that business would have been run off. So we think the actions that we took and the fact that it was premised around the cat payback, that decision was affirmed by Ida for that matter. We could have sat back and said, well, jeez, 2020 was an aberrant year. Let's go deeper into this market and write more primary business or write more homeowners. We just weren't going to see a return, and I think that has been validated. Now I wish we would have done it maybe 2 months earlier because we would have been totally out of it. But I think the decision that we've taken and the opportunities we see in other markets will continue to prove itself out in the fourth quarter and certainly into 2022 when all of that business will have been run off. I think the only thing that I would add on that storm is -- it's another example of a storm taking a further swath of impact, not just in 1 state where it makes landfall, but obviously, it's going into the Northeast. And for what we're doing in the Northeast, it tends to be -- it's really our flood exposure in the state of Pennsylvania. That's a fair bit of quota share and it's short-limit business. So what our exposure really looked like was tended to be more either layered or shared or short-limit business in the Northeast. So it's -- it will be a manageable event. Although, again, there will be losses from the storm that -- while disappointing, majority of which we know are kind of nonrecurring.

That's very helpful context. I mean the modeling firms are keep updating their assumptions for industry losses. I mean do you think this event will be enough of a catalyst to increase reinsurance pricing. How are you thinking about that?

What I would say is I think it will probably -- to me, it's going to look a lot like some of the storms last year. And that if you have losses in those loss-impacted layers, you likely would see a rate increase, but the rest of the program will not be as impacted. And so for us, one thing that we look at, I guess, the silver lining is, the losses that we will generate from either the good majority of them won't be on the books in '22. But my hunch is that it will lead to sustained rate in the impacted areas and regions, and I think it will lead to rate increases on the reinsurance side and those layers that generate loss.

And what about on the primary side?

Yes. Primary, I think it's going to -- it will -- in the state of Louisiana, I think there's going to be considerable capacity needs on the admitted and the E&S side. And I think how we participate in that, it certainly won't be on the admitted side, and it will be pretty modest from a layered and shared E&S standpoint.

Okay. And also just you've done a lot speaking of reinsurance to protect frequency risk, but it's been a very frequent quarter. Any comments just outside ida, how you're thinking collectively on the frequency of losses?

Yes. I mean I think it's -- I guess we've got a couple of weeks left in -- this has been an active wind season. I don't think it's going to look like last year. I think the other thing that we take comfort in is that we put in horizontal reinsurance protection. We put in the aggregate cover to insulate us from multiple events. And so simply put, we have an aggregate that attaches of $30 million. So once we have $30 million of cat loss and that could be from earthquake or hurricanes or severe convective storms, once it tips above that level, the next $25 million goes into the reinsurance market. So it's basically the equivalent of 2.5 retentions. After that, the next 2.5, so 5 retentions would go into -- excuse me, the third, fourth and fifth retentions would go into the reinsurance tower -- or the aggregate tower. So all in all, it's -- we've done a lot to preserve the downside and again, put this 11% ROE floor in place that gives us certainly more comfort on the sustainability of the earnings base.

Got it. And I guess just on that topic a year ago and I was getting up to speed on Palomar, you mentioned that time about 63% of your business does not provide attritional losses. How much of that has changed since then?

Yes. So right now, it's right around 53% to 55%. So it's come down some, but it's still anchored. And we think that offers a fair bit of visibility not just in the underlying profitability, but also the loss ratio and how that trends. But Earthquake and Hawaiian Hurricane are somewhat binary in their coverages and those constitute around 53% to 55% of the business.

Go it. And as you expand your risk profile outside high severity, low frequency like California earthquake, even though that's your bellwether product, how are your reinsurance needs changed?

So as we write more casualty business, the good thing about that is you won't need to support the growth in excess of loss. So that will potentially allow us to retain a little bit more or how we retain it will be more governed by quota share participation or some type of stock loss. So as we diversify and do other lines of business, if the combined ratio is sub-100, it's going to be accretive to the ROE and frankly, allow us to convert more of the earned premium to net earned premium because we won't need to have the excess of loss cover to support that growth. So it should allow us to scale some, but it's still contingent upon us underwriting it well and making sure that the combined ratio is sub-100. And I think a good example of that is our first casualty line on the E&S side was an excess casualty program, and we will write a $5 million limit for that business, but we're only keeping 20% of that. So our limit is $1 million, and we're using mostly quota share to reinsure that. And that's kind of a prime example of how that line of business will be more informed by quota share and potentially some stock loss.

And I guess you spoke about casualty lines, how will your investment posture change like being able to hold on to assets to back liabilities a bit longer?

Yes. That's a good question. Obviously, when we expand into these casualty lines and we grow our overall capital base, we did have the ability to look at longer duration and higher yields for our investment portfolio. We will continue to evaluate it, but we will always maintain a conservative approach to how we look at our investment portfolio. We're just trying to optimize within that framework. We believe that our shareholders are much more focused on Palomar underwriting acumen versus our investment portfolio management.

Got it. Maybe I'll stick with you, Chris, and talk about premium leverage. I mean basically, when your competitors mentioned they could operate at 1.2 to 1.25x premium to surplus. And then on the earnings call, you kind of reminded us you're operating at 0.64x, but I guess you think you could operate closer to 1.1 to 1.2x. And I guess I appreciate from my past life living and breathing risk-based capital models, which is a -- if you look at premium leverage, it's a terrible proxy. But if we kind of look at where your binding constraint is, which I'm guessing is the A.M. Best BCAR model, is there a certain minimum thresholds under your A.M. Best BCAR model they hold you against? And what is your excess position in either dollar or percentage-wise relative to that?

Yes. No, you described it well. From a premium leverage standpoint, we're at 0.64. We feel that we are very well capitalized to grow and then we do have adequate capital for that growth, especially some of the expansion into less catastrophe exposed lines of business. We do feel that, that ratio could increase above the 1:1 ratio that we described before. So with that, we feel that we have plenty of capital to facilitate growth in the near and/or in the foreseeable future. You describe it and thought about A.M. Best as we think about the BCAR model even with that model, in looking at our numbers, we're very strong. I think we're probably as high as we can be in their, call it, mathematical formulas. So we are much more focused when we work with them on some of the subjective topics because our BCAR is very strong and our net written premium to capital is very strong. So with all those components, we're very focused -- are very comfortable within our capital base will facilitate growth on either metric because it gives us the ability to continue to grow, especially when you consider that we're profitably adding to that capital base on an annual basis. So it's something we look at and focus on, but we feel very good about the capital facility and growth going forward.

Got it. So it sounds like you have some strong metrics behind you. So this may be a naive question. Why not continue to operate with more dry powder to grow with even greater force I guess help us make sense of growing and buying back shares. And it was not that too long ago, you basically raised capital in a secondary offering for the purpose of growing. So really, what has changed then to now?

Yes, that's a great question. Obviously, we did do the buyback in the -- were used to buy back in the second quarter. Like I just said, we do feel that we do have adequate capital for growth in the foreseeable future. The buyback for us, we felt was kind of good corporate management and good use of capital when we looked at our share price and the depressed values that we were seeing. So for us, it was very strategic, and we just felt it was a good use of capital even with, call it, the capital raise that we did a year prior. It was just everything from a metric standpoint made sense from a corporate governance standpoint.

Tracy, if I may. Chris described that very well. The one thing that I would add is that we opportunistically bought stock in the quarter, but the amount that we purchased was basically equivalent to the free cash flow generated. So we actually still grew the book value in the quarter while buying back the stock.

That's very helpful. And then just thinking of other types of underwriting capacity. You've recently announced a fronting business. So if you could highlight what that's about? And if I could dovetail the underwriting capacity in that question, like what is the appeal to see there is versus assuming or co-participating in those programs because you just spoke about having that capacity.

Yes. I think for us, fronting us to build to do several things. And first off, we've done it in the past. When we went public, our -- we said -- we were coming off the deals of our Texas homeowners' program being upfront. Our flood program initially started off as a front where we took 10% and ceded off 90% to the market. To me, first and foremost, it allows us to generate fee income. And therefore, it allows us to generate compelling risk-adjusted returns. It will give us the ability to kind of enter and assess new markets while dipping our toe in the water, acting potentially as a participatory front where we take 5% to 10%. But for a newer line, whether that's casualty or property, we could use the fronting to, again, get the underwriting right, learn more about the market, partner with good reinsurers or operators that need access to our balance sheet where we can generate fee income and get the proverbial sea legs, right? So it gives us optionality. But really, for us, it comes down to extending our franchise in a market that we have experienced, that will offer us predictable results and then lastly, gives us optionality, and that optionality is how we participate. So we're pretty excited about it.

Great. I just want to remind folks again, they could submit their questions in the portal or e-mail it to me directly. Maybe just going a little bit more into reinsurance. I think your property catastrophe reinsurance program is well understood. But I think it will be helpful for the audience to better understand your catastrophe risk management process, like basically how you run the vendor capital models, what your proprietary view is on top of those models that could give additional comfort that you own the risk.

Yes, absolutely. And I think this is the thing that if you ask me what keeps me up most at night is just understanding our exposure and making sure that we have a fundamental uniform and unequivocal sense of it. And so our Chief Risk Officer, Jonathan Knutzen and his team and the analytics side really spends the lion's share of their time looking at our portfolio and managing to understand the exposure across apparel, by geography, by age of construction, by construction type, on zonal, regional and locational level basis. And so we do license all 3 of the models, and all 3 of those models are incorporated into how we price risk at a location level and manage it at the portfolio level. But also what we try to do is when we're looking at our exposures, we want to blend the results, so there's no bias from one model to the other. And then like you said, overlay our proprietary analytics on top of that. And within those analytics, what that could be as biases to certain zones, it could be biases to certain types of construction or biases away from them one or the other. And I think what we went through last year on the wind -- from 2020's wind season, informed decisions to take -- make material changes, and how we underwrote, but also how we manage the book, because there were certain things from storms that weren't captured by the model. So that's where, again, that proprietary analytics layer on top of it is really helpful. But for us, again, it really just comes down to making sure that the top of the program is as steadfast and is black swan-ish as it possibly can be. And that's why you want to have a multi-model view. You want to have not just the models vendors view but your own. And then you also want to overlay traditional underwriting, looking at concentration areas and damage factors and making sure that just okay, if there's an earthquake in West L.A., and there's a 10% damage factor to our exposure, where does that sit within our tower? And then say, okay, that's great. Then let's overlay the 1994 Northridge earthquake, and what does that look like? So it's a combination of all those things that really inform how we manage our portfolio and how we look to spread risk, accumulate risk, layoff risk and things of that sort.

That's very helpful because a lot of start-ups just basically have their reinsurance broker running it on an infrequent basis. I appreciate you providing that contact.

Yes.

We have a few more minutes. Just want to remind folks again, just to make questions. I did weave in some questions from the audience that are actually on my list as well. So maybe just to kind of talk about more growth opportunities. When you think about the white space on your Board, I mean, what businesses do you feel like you have to get into or one do you really have no appetite, which would be off limits indefinitely?

Yes. So I think we've kind of identified some that we want to make a big push in over the course of '22 and beyond. In fronting, we just discussed. We've obviously brought on new talent to help us in the casualty side, but in particular, in professional lines and then excess liability. And then I think one area that haven't discussed as much is really trying to go deeper into the food market. Flood right now is approximately 2%, 3% of our book. It certainly has the potential to grow at a much higher cliff. And that's with the focus on inland flood. I should point that out. That tends to be more inland flood. So I think rivers as opposed to storm search. But I think that's a market that we want to go deeper in, and there's potentially some regulatory change that could prove fortuitous to that with some reform in the NFIP and the reunderwriting of the NFIP's book. So that's another area. I think we also want to continue to go deep in earthquake. As I mentioned at the outset, there are some catalysts or potential catalysts for growth there and further disruption in dislocation in the residential earthquake market specifically. As it pertains to those that we probably would say would be off limits at least for the undefined future, workers' compensation is probably one, you got to be very good at that. I think Florida homeowners is another one that there are people that are really good at that, that are still trying to get their hands around the regulatory environment there. So those are 2 that I would say we certainly won't write on a primary basis.

Maybe just a follow-up on flood because modeling is so important to you guys. How do you feel about modeling capabilities for flood just given like how outdated these flood maps are?

Yes. So I mean we've never relied on the flood maps. We've come up with our own. When we launched our flood product, we did it in concert with AIR. And again, that was more inland flood. And what we've been able to do and why we've been able to have, our inception-to-date loss ratio is sub-20% on the flood. And that's riding in states that do take flood losses like Pennsylvania or Illinois or California for that matter. What we've done is we've always come up with our own flood exposure. And we priced flood and come up at the geo code level. So we carve up a state like California or Washington or Pennsylvania into a 30 x 30-meter grid. And the expected loss is at that grid level. And so it factors in elevation, it factors in distance to fluvial and fluvial flows. So it's our model. It's not doing the right your own where you're just pricing of the NFIP. We have our own exposure.

That's very good concept. I'm just wondering if either of you had some bold predictions going into 2022.

Well, it's weak 1 of the NFL. So it's a liter early to call the Super Bowl winner. But I think for bold predictions for Palomar is that I think you'll start to see fee income grow. And I think you'll also probably see sustained growth in earthquake. That's our -- certainly, those are operational objectives. And I think -- yes, those are probably 2. And I think what you'll also continue to see is the ILS market in the insurance space provide more and more solutions and the more viable -- got viable, even more viable alternative to the traditional reinsurance market.

Chris, any for you?

I was going to stick to sports, but I was going to go back to the ending baseball season. It still give high hopes that the San Diego Padres are going to be able to pull off a world to his victory.

That is bold.

Yes, they've been struggling, but they're still in the wildcard.

That is bold.

That's favorite team and [ that's forming ] California. So that's awesome. Okay. Thank you so much for your time. I really enjoyed today's discussion. And with that, the session concludes.

Thanks, Tracy. Appreciate it. Thanks for having us.

Thank you.