White Mountains Insurance Group, Ltd. (WTM) Earnings Call Transcript & Summary

Good morning. Everyone could take their seats, please. Let's get started. I'd like to welcome you to the annual White Mountains' Investor Day. I'm Weston Hicks, White Mountains' Chairman. And I'd like to welcome, obviously, those of you in person and everyone participating via webcast. We are fortunate to have a number of White Mountains' directors in the room today for the presentation. I'd like to briefly introduce each of them and perhaps you can raise your hand when your name is called. Reid Campbell, Pete Carlson, Mary Choksi, Margie Dillon, Phil Gelston, Suzanne Shank, David Tanner and Steve Yi, and I would just editorialize here, this is a terrific board. I'm privileged to be part of it and to have these people as colleagues, and I say that having seen a few other boards. So this is a really good board. With that, I'll turn the program over to Manning Rountree, our CEO, who, along with Liam Caffrey, our President and CFO, will take you through the presentation. Thank you.

Thank you, Weston, and welcome, everybody, to White Mountains' Annual Investor Day. I'm going to do a few more introductions of the White Mountains' parent company senior team. Raise your hand if you would, Liam Caffrey, CFO; Rob Seelig, General Counsel and Investor Relations; Mike Papamichael, Deputy CFO; Jason Lichtenstein, Deputy GC; Dave Staples, Head of Tax; Makela Hildreth, Chief Accounting Officer; Caroline Fedorowich, General Auditor; Mark Plourde, CEO of White Mountains Advisors; Jonathan Cramer, Chief Investment Officer; Chris Delehanty, Head of Corporate Development and M&A; and Jen Moyer, Chief Administrative Officer. I would note, as I do every year, that each member of the senior team at White Mountains is a White Mountain shareholder. And in most cases, owns stock worth many multiples of their salary. And I can assure you that the entire team thinks like owners. I want to introduce 2 new faces. First, John Daly, who joined us last fall as CEO and managing partner of a new venture called White Mountains Partners. We're going to talk about that later, John, and Giles Harrison, who will join us next week as EVP and Chief Strategy Officer. All right. I'll introduce the senior teams of the operating companies as we move along. And a quick word on the format. We're going to open for Q&A after each section of the presentation. And so please ask your questions as they come up. All right, let's get started. 2023 was a good year for the company. ABVPS was up 14%. The stock price was up 7%. Stock price so far this year is up another 20% or so. Last year, there was really no one single driver of returns. But we had contributions from a number of different areas, in particular, strong operating results at Ark and good operating results at Kudu. The investment portfolio had a total return of 9%, which is a great result no matter how you look at it. And we've really been spoiled by excellent investment performance these past few years. And finally, we added value through a series of capital deployment activities, which we're going to discuss. This slide puts our returns into context. The thing to realize is 2023 was a strong year for P&C insurance companies in general, strong book value returns and also strong market returns. And the story of our return relative to indices is pretty simple. Our P&C businesses, chiefly Ark and Outrigger outperformed those indices while our non-P&C businesses performed well, but lagged those indices. So remember, our goal is to compound our per share values over long periods of time and growing ABVPS in the mid-teens, well in excess of the 10-year T plus 700 is a result we'll take year in and year out, and we're confident that the share price follows that. Capital management, absolutely core to what we do at White Mountains and we did a good job of it in 2023. We did 3 deals, which really had a strong impact on the results for the calendar year. First, the launch of Outrigger 2023. We'll talk about that in the Ark section. Second, our tender for 5.9 million shares of MediaAlpha, sort of midyear. We'll talk about that. And the third, the round trip of a preferred stock investment in Doxa. All 3 of these deployments, that you can see here, produced outsized returns for the company. Separately, sort of in the back half of 2023, we also made a number of deployments that, we think, will drive positive results in the future. We made an incremental commitment to Kudu for $150 million that will get drawn down as the deal flow comes through. We made an acquisition, we acquired a control stake in Bamboo. We're going to talk about that and introduce you to John Chu. We rolled over Outrigger for another year in 2024. We downsized our commitment a little bit, but the vehicle is still there for the next year. And finally, we launched White Mountains Partners, which we'll talk about. All right. With that, I'm going to hand off to Liam Caffrey, who's going to take us through the capital and financial position.

Thank you, Manning, and good morning. I'm going to start just going through a couple of slides to describe our capital position and financial position. The first one is a slide that just shows our capital distributions and deployments over the past 7-plus years to give some context for our recent activity. And I'm going to divide this into a couple of distinct time periods. The first is the period from, call it, end of 2016, beginning of 2017 through the end of 2020. If you dial back to 2017. We had roughly $3.1 billion of undeployed capital, which was about 75% of our total capital base. This was on the heels of the sales of companies such as OneBeacon, Sirius, Symetra, Tranzact. So we embarked on a program to put that capital to work through a combination of $1.8 billion of new deployments in companies, most of which you see on this stage and $1.5 billion that we distributed back to shareholders, predominantly through a series of self-tender offers such that by the time we ended 2020, came into January of 2021, after the Ark acquisition, we were more or less fully deployed. Dial ahead to the middle of 2022 when we had the sale of NSM, which resulted in another $1.6 billion of undeployed capital at that time, which was about 1/3 of our capital position. So not quite as extreme as what we saw in 2017, but still a reasonable chunk to redeploy. And again, we executed on a similar playbook through a combination of value-added returns of capital to shareholders, predominantly through a self-tender offer that we executed in September of '22 as well as $1.1 billion of new deployments, many of which are the deployments that, Manning, just discussed, Bamboo, Outrigger, Doxa, et cetera. Such that at the end of 1Q, we had about $600 million roughly of undeployed capital that we continue to look to put to work through redeployments. Next page just summarizes our financial position as of the end of 1Q. Total capital of $5.6 billion, which is predominantly in shareholders' equity. We continue to have no financial leverage at the parent, but we do employ prudent financial leverage at our individual operating companies. Today, that includes Ark, HG Global and Kudu. Our consolidated debt to total capital ratio is 10%. That's down a little bit from 12% a year ago, which is essentially growth in capital with roughly flat debt levels and as I mentioned, our undeployed capital at the end of 1Q was roughly $600 million, about 10% of our capital base. So that's the position where we find ourselves today. With that as a segue, what I'd now like to do is we'll kind of walk through each of the individual operating companies. And the way we'll do this is Manning or myself will share a few slides just with an overview of each company. The White Mountains transactions that brought us here. And then ask the individual leaders of those businesses to share some thoughts on the businesses and the trends that they're seeing within them. Before we do that, I'll just walk through the full lineup. Again, this breaks down our owner's capital per share of roughly $1,800 of adjusted book value per share at the end of 1Q across our different operating companies. You'll see the combination of Ark and WM Outrigger is now our largest capital position, followed by HG Global, Kudu, Bamboo coming into the family as of January of this year. So those represent our 4 major consolidated operating businesses. We then have 3 of our larger nonconsolidated operating businesses, MediaAlpha, PassportCard and Elementum and then a mix of other consolidated and nonconsolidated other operating businesses, our strategic investment portfolio and finally, undeployed capital. Next page just shows a few facts on each of our, again, 4 major consolidated businesses and 3 large nonconsolidated businesses. Again, the combination of Ark and WM Outrigger represents a little bit over $1 billion of adjusted book value per share. You'll notice that Bamboo has also come into the chart here for the first time this year. Maybe 3 themes to highlight on this chart. The first is all of these are insurance or related financial services businesses. We'll talk about White Mountains Partners later, but the core of what we do has been and will always remain insurance and related financial services. So all of these major positions are in this sector. Second, what you'll notice is we have a clear preference for control positions, 5 out of these 7 positions we hold control. MediaAlpha, we held control prior to the IPO. So Elementum is really the only exception where we came in, in a minority position. Our clear preference is to own, control and operate these businesses. And then finally, I'd point out the management ownership. As Jack used to say, we want to think like owners. As Manning said, all of us at the management level are significant owners of the business and think about driving value creation. And likewise, everyone you see on this table today. They're all founders, but they all own significant stakes in the business. So we are 100% aligned on how do we create long-term value through how we operate these businesses, and that's a key tenet for us. So with that, let's move into the individual operating companies, starting with Ark and WM Outrigger. Again, I'll give a couple of pages just on overview and then ask Ian to come up here. So Ark, as we've discussed before, specialized P&C reinsurance and insurance business, founded by Ian Beaton, who joins us today and Nick Bonnar, the Chief Underwriting Officer. Writes 5 major lines of business: Property, specialty, marine & energy, Accident & Health and casualty, in that order of size today. Two different platforms; 2 Lloyd's of London syndicates, and then now a Bermuda-based insurer/reinsurer called GALE, which was scaled up using our investment in 2021. And very proud of the fact that it's been a top quartile underwriter at Lloyd's over many years. And Ian will talk a little bit about that. Next on Outrigger. So Outrigger Re Limited is a reinsurance sidecar, which Ark sponsored beginning in 2023 to write a quota share on Ark's Bermuda property cat Excess of Loss reinsurance book. The cell which we participate in and we invested is called WM Outrigger and we consolidate that within our financials. This is a sidecar that's renewable annually, both at the discretion of Ark as well as the capital providers. We launched this in January '23 on the back of Hurricane Ian and what we saw coming as a very hard reinsurance market. Ark launched this vehicle to allow them to scale up and take advantage of that hard market, $250 million of total capital in 2023, White Mountains provided $205 million of that capital with third-party providers stepping in for the remaining $45 million and through 1Q of this year, it has produced roughly a 35% return for White Mountains. It is still on risk slightly through the end of this month, but through the end of Q1, 35% return. Given the market dynamics, Ark decided to renew Outrigger for the 2024 season. White Mountains rolled over $130 million of its commitment. Third parties took the rest and so far, through 1/1 and 4/1, and safe to say 6/1, it's on plan, and the risk return profile remains in line with, if not slightly better, than the original business case from 2023. So maybe here one question we often get is, well, if the perspective returns look as good as they did in '23, why did you downsize your commitment? And for us, it had nothing to do with perspective returns or a view on the market. It was more relative to our undeployed capital position. When we funded Ark originally in January of 2023, we had $1.1 billion of undeployed capital. So $205 million was about 20%, a little bit less than 20% of our undeployed capital. That felt like a well-calibrated bet on the reinsurance market. Dial ahead to the end of 2023, we had roughly $500 million of undeployed capital at the end of the year. So $200 million felt a little frothy to us. Something closer to $130 million felt like a better calibrated bet. So for us, we never make investment decisions in a vacuum. Our undeployed capital is one of the factors we take in and $130 million, there was not necessarily any hard science to it, but it felt better calibrated relative to our undeployed capital position at the end of the year. Finally, let me talk a little bit about Ark's recent results, and then I'll shut up and let Ian come up. Excellent results in 2023, as, Manning, described. A combined ratio of 82%; gross written premiums of $1.9 billion, which were up 31% year-on-year, heavily driven by property lines; blended risk-adjusted rate change of 15% across the portfolio and growth in tangible book value exceeding 40%. So far in 1Q '24, similarly strong results, combined ratio of 94%, in line with prior year. Gross written premiums of $872 million, which were up 8% year-on-year and blended risk change of plus 3%. So rate change clearly moderating but still positive. So with that, I'll ask Ian to come up and share some more detailed thoughts.

Good morning, everyone. Talking of shutting up. That's exactly what Nick Bonnar, my business colleague, told me to do. I said it was my job not to today, and so he said he's not coming. So I stand alone. Actually, he sent his apologies. He can't be here today, personal commitment. So the first slide here shows profitability from an underwriting perspective, the red line. So the lower it gets, the better it gets over time. And the column stacks are really how we've grown over the last 3 or 4 years. So 2020, when White Mountains invested, we were about $600 million gross written premium, and we've tripled that to the end of last year. We don't expect that growth to continue because the hard market will not continue to rate accelerate in the way that it has done in the past. But at the same time, we've made good margins. So in 2020, we had a combined ratio of 98%. It's a bit of a fudge that number. That number is a U.K. GAAP number, so you can probably like-for-like knock about 3 or 4 points off to convert it to U.S. GAAP. That's my crude rule of thumb. The accountants in the room will be in horror, my simplicity on that one. But we think low 80s is a good number and we'll see if that continues or not. So that's that one. This slide is slightly more complicated. So we started with the easy slide. We've now gone for -- you've got to focus your eyes a little bit harder on this one. So we've got a Y axis, which rank orders the volatility of all the Lloyd's syndicates that have been around for at least 5 years, from 2019 to 2023, on the Y axis. On the X axis, we've got the rank order of profitability. So low volatility and high profitability is the place to be, and we've made it easy for you by going to a green color and then a sort of slightly soft pink for a bad place to be. We put this slide up because we don't produce it. Insurance Insider, a trade magazine, produces it. So it makes it very easy for us to put up, and it makes us look good. So what we're really saying here is we've grown by about 3x, and we haven't suffered in terms of quality of results of that. So we aim to be -- and aim to continue to be in top quartile at Lloyd's and have done. The 10-year picture is very much the same. So this is where we want to be, managing volatility and profitability. So that's the sort of the past and the present and what about the future? So on the left-hand side, there's a few bullets about what's happening with rates in the market right now. We've had a very, very strong ride in property insurance since really 2018 and then property reinsurance sort of a couple of years later than that. And we're at the top. But it's a fragile top. Things are moving. So if we look year-to-date across our entire business, rates are up about 2 points. Almost flat and marginally up in property insurance and reinsurance. And then up to 2 or 3 in Marine and Specialty. A&H always seems to be flat for some strange reason and then casualty is up sort of mid-single digits. And where do we go from here? We had a good run. I think many, many companies are making good margin in property insurance and reinsurance. And we're seeing the beginnings of softening, but it's a fragile softening. So as you'll have seen at the 16s, if you're following that, bottom ends of the programs were going up slightly still because not every one wants to play at the bottom end and the top ends were probably off 5 or 10. Now it will only take one season of activity for things to change again. Hurricane Ian kicked it on in '22. And obviously, this season, we can read the forecast about El Nino and La Nina and make their own views about how active it's going to be. But I think there's a certain nervousness out there. We're not seeing walls of capital coming in, but we do see sufficient capacity in the market right now. So that's where we stand on rate and the market conditions as of the 7th of June, and I will be wrong probably by the 7th of September. But there's lots of uncertainty out there as well. So war, political violence, a lot of elections coming up, a lot of strikes right, civil commotion areas that could kick off and have kicked off. The Ukraine continues to be an area and Eastern Europe as well. So there's an area of uncertainty that we see opportunity for political risk and specialty lines to continue to find pockets of opportunity. Similarly, we all know about cat risk. We all know about secondary perils. It's been a very active [indiscernible] SSCs and severe convective storms. So in old speak, tornado and hail. So we think there's opportunities at the secondary peril and as well as people learn to price it better. And then finally, within areas of casualty, [indiscernible] talked extensively about social inflation or legal inflation and nuclear verdicts. And we're continuing to see things change there as well. So some quite different dynamics in each of the specialty, property and casualty markets. So going ahead, this is a slide where [indiscernible] look back in a few years' time and said, why did I even say anything? Forecasting the future is a mug's game. So here I am. The mug in the room. In the near term, we think rates and profitability are good. Don't tell everybody. [indiscernible] want some. But we think they're good, and we see opportunities in the classes we are in, structured property being a very interesting one right now. Longer term, we see changes afoot. So some of the secular themes are obviously pricing and pricing model for cat, climate change, all those things that I could repeat but are true and real themes and you see structural changes to some of the models that [indiscernible] RMS, for example, V23 could have a big impact there. And you see structural changes in the admitted markets and the E&S markets. So the E&S market is undergoing structural change in growth, and we think that's going to be a bigger market, and we don't think it will shrink back down as it has done in other cycles previously. We also haven't think as a result of that, that some of the E&S market will begin to be admitified. So that's a new word, I've introduced it today. I'll be happy with that, go home and tell your friends. So we think there's opportunities there. And irrespective of that, we're always on the hunt for good teams, and there's always good teams around or at least willing to talk. Three that have recently joined, and accident and health team, they've got a great franchise. The full team is on the ground since January and making good traction. We'll see how they get on over time, but it's a good start. Marine liability, marine liability. Well, what's marine liability? Well, the Baltimore Bridge accident is the marine liability claim. I think we'll disclose with our numbers on that one, but if it's a $3 billion loss to the international group, then it's probably a $15 million net loss to us, and that's within our sort of loss load expectations for large losses in any one quarter. But we think there will be opportunities within marine liabilities as well. And then we talked about political violence, political risk, sort of crisis management broadly. We think there's ongoing opportunities and pockets there because it's a lively old world. Seems very brief to talk. Nick could have been here and stomached that few minutes [indiscernible] me. Any questions?

Yes. Any questions folks out? Ian and I can tag team. I can take the White Mountains view and Nick on the Ark view.

I was going to talk about Outrigger from our view. We've got a real [indiscernible]. I was just going to fill in time. But no, go.

Would you be kind enough to expand on the cycle? And specifically, how different it is from the past as it relates to the new capital competing versus existing players? And what does that mean in terms of the pricing over the next 3 years plus?

I'm going to get this answer wrong. So what I observe is over past cycles, whether they have been property and casualty or property predominantly and this cycle has been predominantly property in specialty. If you sort of go back to the '80s and [indiscernible] ACN XL, it was casualty, early '90s. It was property and then the casualty guys at the property guys and then you roll forward to 2001 and you've got a property and casualty cycle. And then 2005, we had property only after KRW Katrina [indiscernible]. So most of the time, it's a property mostly only play with the occasionals of casualty woke up for a moment and then sort of slumbered for another 20 years. In each of those cycles, we saw start-ups. We saw new capital come in on a new platform. And the PE play was -- I can get in, I can make 15% ROE for 5 years, and I can get in that book, and I can get out at 1.5x book, and that's a 3x and everyone goes home a winner. And what's happened in the last cycle, at least, was people got in a book and maybe they haven't even got out of book. And so the willingness and ability to deploy that capital for a platform play has diminished because of getting paid for the illiquidity premium. And so I think that hasn't gone, but the amount of capital that goes into a platform versus shall I just go into a trade and so what you've seen in the last sort of cycle is much more [indiscernible] our sidecar because I can collapse it. I can wind it up. and I got into a book, and I got out of book, but at least I made a return. So the exit is much cleaner and clearer. So that's how I think this cycle is slightly different from the last 3 or 4. What does that mean for rate. Well, there's the theory of the case. And then there's the reality of what we actually see happening on the ground. The theory of the case is if capital can get in as a trade and get out as a trade, then you top and tail the cycle and the cycles will become less volatile. The reality is, of course, what we've seen in the last few years is actually D&F has never been better and property is right up there. So the theory of the case is just not met with the practicalities of what the textbook should say. So what does that mean is anything I'll tell you theoretically will be practically wrong.

Just a follow up. Because we are experiencing inflation and it looks like it may be with us for a lot longer. How does it change the industry do you think, especially pricing? And do you see anything yet in the marketplace that you can point to, where competition is beginning to be more thoughtful about taking inflation in a way that it's not just a 1-year phenomenon but longer term?

So I'll split that into 2 parts if I may, which is simplifying it massively in terms of inflation, one of which is I'll call property and a short-term impact and the other one I'll call genuine social legal inflation rather than sort of the inflation that you and I experience as a sort of PCE type inflation. And so I take the property inflation. What happened was that actually kicked on industry exposures and values. And so total insured values actually were reflected in an inflation uplift. And so that actually was fully reflected in rate, I would say. And so rate had a [indiscernible] property was not really an issue that the inflation has caused an issue for nor have we seen it in recent claims inflation per se. So I think sort of rate has managed that one reasonably well. On the sort of, again, casualty inflation but not really related to inflation that we see day-to-day 2 things, one of which is inflation and therefore, interest rates and if we look long term at our industry, our industry of nauseously depressing because effectively what are we but a leverage bond fund effectively as an industry. And that just makes me feel sad I just go I am a leveraged bond fund really. But of course, the good thing is, of course, is the dispersion of returns with our industry is enormous. So I think the dispersion of returns in our industry is amongst the highest in all the industries I've made that statistic up like 88.2% of all statistics made up of the spot -- that was part of that, right? But I think the dispersion returns the last time I looked, it was 20-plus years ago, that was true. And so people can make good margin and the investment returns will be part of that. And now you've got a formal view on what you think you're going to do with interest rates and you and I can both have a glass of red and both be absolutely right about how the rate cuts are or aren't going to happen. The different sort of inflation, which is a casualty inflation in our plan to White Mountains when we sort of put it to them sort of 3.5, 4 years ago was simplistically was not this, but simplicity, it was property and then specialty and casualty will harden. And we've been deeply disappointed by the opportunities that we have seen within the casualty space because we think there is continuing inflation to be experienced and come out that means that it doesn't meet our return thresholds. So are people strengthening casualty reserves because they can afford to tuck it away or they're really seeing real things, well, maybe horses for courses, but we're yet to be excited by casualty. So I think rates will continue to go up, but maybe not by the margins that we would aspire for them. That's a general comment on -- there's always pockets of casualty that can be quite interesting.

Ian, based on your portfolio, what would be market share for Ark together with Outrigger of Florida hurricane or Northeast hurricane, given all the expectations of that.

It's tiny.

Fraction of a percentage.

Yes less than 1%.

Okay. Less than 1%. And then maybe you time the cycle very well, obviously. But kind of going forward in the next stage, what kind of returns do you think we should expect?

So we timed the cycle very well. Thank you very much, that one. Well, we've been waiting quite a few years for it. So eventually, it will happen. What returns should we expect? We don't give guidance to. Good returns, sounds about that. nonnumeric. So our long-term Ark internally has a mantra. And one of the mantras is aim for 2015 ROE. Over time, we've achieved that. Do we ever always achieve it. No. But over time, yes.

So a question that came in over the Internet for Ian. Can you expand on why you think E&S is experiencing structural growth and won't eventually seed share back to the admitted market like we've seen in the past? And related to that, could you also expand on the structural changes in and admitification of the E&S market.

Okay compound questions with a simple man like me means I'll forget part of it. So why do I think there's a secular change in the admitted to sort of E&S market. In prior cycles, we've observed that customers prefer admitted markets. They're more regulated. And people in personal feel it's a sort of a safer place to be. And the admitted market has experienced sort of a few issues. The first one, it's just been quite unprofitable for a considerable period of time. And so the people have withdrawn from it as carriers. And so why would they be reluctant to go back in as things soften versus the last time when they went back in really sort the nub of it. And part of it is, given the growth of E&S is partly the severity and complexity of the risk, mostly driven by cat and cat can be obviously cat because people like to live in places where bad things can happen to them. So live in Florida, a beautiful place, but what happens when a wind storm happens, bad things. Live in California. How did those mountains get pushed up? Bad things can happen, right? So those are big growth markets just in terms of exposure. And in terms of the pricing for that, we think it's tough in a more heavily regulated environment with social pressure to adequately rate for that. And so we think there's that structural pressure that people will be reluctant to underprice their business to go back into the admitted market where some of these more catty and complex risks are more naturally sitting ceteris paribus in the E&S market. So we think that's slightly different, i.e., the rise of cat perils and secondary perils, partly due to the world being a hotter place, but also partly due to just the weight of people wanting to live in beautiful or Sunny or hot or luxurious locations. Can't remember what the second bit was, I told you?

Admitification.

Admitification. So I think there's a natural tendency of, thank you, regulators to want to regulate. And as one market gets bigger, it's a bit like whack-a-mole, which is it pops up over here, so want to regulate there. So there have been various statements about wanting to change rates or less flexibility on form, which I think you can follow it probably in the press.

Ian or Liam, at what point do you think it might make sense to take Ark Public? You guys have significant scale at this point. Does that make sense at any point?

Do you think I want to be public?

It's not up to you.

Yes, it is. Oh no, it's not. Oh yes, it is. So -- I didn't realize we're doing comedy today. It's brilliant. Not busting a gut to do it, to be honest.

No advantages of...

Look, there's always pros and cons on both sides as a personality if you can call me that. My preference is, I've been private for a long time at a series of private equity or project like owners, it's a space I involve in. It means very much I can focus on the business and I like that. It's not like it's never. It's just -- I'm not like busting my guts to do this sort of thing.

Yes. And from the White Mountains' perspective, I mean, we aspire to own and operate businesses that are going to compound book value over a long period of time. We're quite happy. Ark is doing that faultlessly right now. So we're happy owners and really don't see any impetus to do a transaction versus just keep on doing what we're doing.

I'd add one comment, which is if you think about a public Ark, the one thing you really gain is optionality around the capital base. That's sort of it. And we're at a point from a White Mountains' perspective where that optionality is not worth that much to us, given the views that Liam has just shared plus a reasonable amount of undeployed capital. So on the other hand, there's a lot of downsides to being public. So I just don't see the case for it at this point.

So in other words, if you think we've been clear in the answer then we haven't been ambiguous enough.

You shared a slide with rates about up 2% in 2023. This is hypothetical, but let's say, not a bad cat season this year, next year, very big assumption. Price is down, say, 15% next year, 15% the following year. What happens with that compounding of your equity value is like a first question in that scenario? And then secondly, you're an owner, what's the threshold in your mind where you say we're going to turn off writing new business?

So I mean, the obvious answer to the question is if it came down by those amounts, which means I think you're a tad pessimistic, but you might be right, you might be wrong. Profitability comes down, right? There's rates and then earned profit obviously lagged by a little bit, but ultimately, that will feed out. In terms of what we do at the top line, we shrink it. We've done it in the past. Lloyd's in the last soft market grew by about 1/3 between 2014 and 2019. And I think we shrank cumulatively over that period by 13%. So it's all about ROE. That's why we have a little tagline [indiscernible]. So keep banging out the profit. And if the top line moves down, that's fine. We're growing aggressively now and have grown aggressively because we thought we could do the top line and the bottom line. And when one has to give, then this can be the top line. It's quite simple.

Just a follow-up to that question. So to be crystal clear, the conditions in the marketplace are attractive today, but you are seeing slowing down in the price. And the returns are still good.

Correct. Any more questions like that. I like questions like that. It's good.

All right. Thank you, guys.

All right. Let's shift gears. We're going to turn now to Build America Mutual and HG Re. I think it's always useful to do a little refresher on the structure of this deployment. BAM is a financial guarantor of a central public purpose municipal bonds. This means bonds issued by state and local governments to cover things like sewers and schools and utilities. And the structure here is very important. BAM is the primary insurer that faces the market. It's a mutual company that's owned by its member municipalities, the same municipalities that uses insurance. It's not owned by White Mountains. And HG Re is a single-purpose first loss reinsurance company. It's a private stock owned, a company that's owned by White Mountains. So our interest really come through HG Re. We provided the formation capital of BAM, which included $500 million of surplus notes. And so White Mountains' economics from this business come from 2 places. The interest on the surplus notes and the reinsurance profits at HG Re. Typically, we're joined at this meeting by Sean McCarthy, who's the CEO and Co-founder of BAM. Unfortunately, he had a family commitment and a long-standing conflict. He is not able to join us. In his place, we're joined today by Kevin Pearson, who is the President of HG Global and by Suzanne Finnegan, who is the Director and the Chief Credit Officer at Build America Mutual. And Kevin is going to take us through the results and the business trends.

Thank you, Manning, and good morning, everyone. BAM had a pretty decent year last year. Although gross written premiums and MSC were down slightly about 10% versus the record year in 2022, it was still their third best result since inception. Par insured was relatively flat year-on-year. So the cause of the decrease in gross written premiums and MSC was really total pricing. And the decline in total pricing was really driven by 2 distinct factors. The first was spread compression within the market. The second was really related to the change in the mix of business that BAM wrote. So BAM operates in 2 distinct segments within the muni market. The first is the primary market, where issuers purchase bond insurance directly from BAM for new issues that they're bringing to the market. Second is the secondary market. And in that market, institutional investors purchase bond insurance from BAM on deals that have already been issued on an uninsured basis. We tend to find that these 2 segments are quite complementary. So for example, in 2022, when interest rates were increasing rapidly and the bond market volatility was quite high, we saw decreased activity in the primary market and increased activity in secondary market, but secondary market accounted for 24% of par insured in 2022. In 2023, that sort of reversed a little bit. So obviously, the market has calmed down a bit. Primary market activity was still fairly muted, but secondary market decreased relative to 2022. In fact, it accounted for 17%. Part of the reason why this has such a big impact on total premium is that pricing in the secondary market tends to be much higher than in the primary market. And that's really driven by the sort of bespoke nature of the transactions that are entered into in that market. And obviously, the fact that a lot of the activity tends to increase during periods of volatility. BAM continues to focus on making cash payments on the surplus notes. This obviously sends a strong signal to the market regarding their financial strength. In 2023, they made a cash payment of $27 million, which was pretty much in line with the past few years. This is the seventh consecutive year that they've made an annual payment on the surplus notes. And over that 7-year period, they made an aggregate of $250 million payments on the surplus notes. 2024 is off to a good start. Par insured is up 24% year-on-year, which is really being driven by the primary market. But once again, we're seeing the same sort of activity that we saw in 2023. So pricing has come down for the same exact 2 reasons. We're seeing spread compression once again within the primary market, the muni market. And we're seeing, again, reduced secondary market activity, given the decrease in volatility. In the first quarter of 2024, secondary market activity accounted for only 10% of total par insured. The primary market obviously is very sensitive to changes in interest rate and in particular, sudden increases in interest rates. So from 2021 to 2022, we saw nearly a $100 billion decrease in primary issuance. Most of that decrease can be accounted for by a decrease in refinancings. So in 2021, refinancings accounted for 40% of the primary market, whereas by 2023, that had decreased to just 20%. So far in 2024, we're seeing a return to more normal conditions. In fact, if anything, an acceleration of primary issuance. As of May 31, total primary volume was $190 billion, which is 34% higher than last year, and it's the highest that we've seen in at least the last 10 years. The other important point to note here is the steady increase in insured penetration, both on an overall basis as well as within BAM's target market. So overall insured penetration has increased from 4% in 2013 up to 9% in 2023 on the target market side. So the target market really represents those deals within the market that are eligible or at least have the potential to use bond insurance in particular BAM's bond insurance. So it's investment-grade rated deals up to AA-, deals that are issued on a fixed rate basis and deals that fall within BAM's credit sectors. Historically, we've sort of seen that penetration rate at around 25%, 26%. That increased to 31% in 2023. And that's continued into 2024. In particular, what we've seen over the last sort of 1.5 years is a large increase in the penetration rate for large transactions. So that is deals that are over $100 million. So from 2022 to 2023, we actually saw a 50% increase in the penetration rate for that size deal, and we expect to see that going forward. The other point I'd make here is on credit spreads. We've seen credit spreads continue to decrease over the last several years and again into the first quarter of 2024. My personal view is that a lot of that is being driven by very strong investor demand as investors are looking to lock in absolute high yields. But by the same token, we've got this overhang from the last couple of years of lower primary volume in 2022 and 2023. So my expectation is that we will start to see those spreads widen. We have seen in the last few weeks the muni market be outperformed by the treasury market with muni yields increasing. So I think we are starting to see a little bit of a wobble in the market given the high primary volume that we've had so far this year. BAM tends to write paper, obviously, that's our long-dated paper typically sort of 20 to 30 years in maturity. As a result, it's a weighted average life of current portfolio exposure is about 12 years. So it really needs to pay particular attention to its financial resources. The most comprehensive measure for that is claims paying resources and that effectively includes qualified statutory capital, the value of assets held in collateral trust as well as BAM's own UPR. In 2023, that hit $1.5 billion for the first time, and that's up from $584 million at the end of 2012. The growth in claims paying resources was both organic, driven internally as well as from third party. And the third-party capital that BAM has been successful in raising, and have been very adept at raising, is through the capital markets with excess of loss reinsurance that's being provided through insurance-linked securities. They've done 3 of those transactions since 2018 for a total of $400 million, which represents about 44% of the increase in total claims paying resources since 2012. We expect those transactions to continue to be a very useful tool for BAM going forward. In terms of BAM's key priorities, obviously, it's to grow and expand BAM's existing lines of business, but it's to grow those within, obviously, the muni market only. BAM is a muni only insurer and it will stay that way. It's a much simpler and stronger story to tell, and we believe that gives them a real competitive advantage. In terms of the primary market, the focus will be increasing insurance utilization in targeted regions and credit sectors. So those are the sectors that are obviously providing them the best opportunity in terms of returns and in terms of using insurance. In terms of the secondary market, BAM has invested a lot in building a very, very potent secondary desk. It's one of its real competitive advantages. The secondary desk, instead of just waiting for transactions or trades to come in, is very, very proactive. And their key priority is to broaden that institutional investor base. And one of the ways that they have been looking at doing that for this year is trying to automate that process. Obviously, it's a very human capital-intensive process of developing trades for specific investors. The hope is that through automation, they'll be able to leverage that human capital. BAM's AA stable rating is critical to the success of the business. So the real -- almost the ultimate priority is to preserve that rating. On May 29, S&P reaffirmed that AA stable rating and noted, in particular, the BAM's very strong capital position and its capital adequacy position. BAM is committed to maintaining that position, which really means that we really have to focus on an efficient utilization of capital. As part of that, they recognize the importance of continuing to pay down the surplus notes and a strong signal that it sends to the market in terms of financial strength, and they've committed to doing that going forward. Happy to take any questions.

Can you please talk about the competitive environment? I mean, it was a very minor decline but still a decline in market share in the first quarter. But outside of that, just if you don't mind talking about the competitive environment.

Sure. I mean, the environment remains very competitive. So obviously, first and foremost, we're competing not only with the uninsured market, but then competing with our competitors assured. I would say that in terms of the -- for the first quarter, the decrease was pretty minor in terms of the number of shares. But I think what's really happened there is assured in the first quarter tends to be more aggressive in terms of fighting for its market share ahead of their meeting with S&P, quite frankly. And we've seen that throughout the years.

I'll jump in. I think you got to distinguish the two markets. The primary market price competition is very stiff. It always has been since inception. I don't see any change to that. I think market share has been pretty stable as well. I wouldn't read too much into the fluctuation in the first quarter. The second piece, of course, is the secondary market where there's less competition. It's more idea generation. It's more bilateral conversations with trading partners, and there's much more pricing power. That's a place to focus, and we are focused on it.

The penetration rate that you had disclosed, like the 25% or so. And you kind of mentioned an uptick in adoption of the larger policies. I just wasn't sure what that penetration rate may have looked like 10 years ago, what it could look like 10 years from now and sort of the driving forces behind that.

Well, in terms of the overall insured penetration rate, it was about 4% 10 years ago or 12 years ago, and that's up to 9%. In terms of the target market, I don't have that figure in hand from 10 years ago, but it has certainly grown steadily from sort of the 20%, low 20s range up to 31%. I think we're going to continue to see -- what we're really seeing is a greater acceptance from investors of insurance and greater valuation for insurance from investors, and that is driving that steady growth. I think on the large transactions, in particular, that growth is really coming from a greater acceptance by institutional investors. And that market has tended to be, I would say, sort of just throwing a number out from 12 years ago, it's probably closer to 1% in terms of penetration. That's probably now more like 6% of the total and that's the total market of deals that are over $100 million.

My question has to do with the municipalities and the population aging, where specifically the liability that is growing in their pension obligations. How do you take this into account? And what kind of exposure do you have.

I'm going to pass that one off to the Chief Underwriting Officer of BAM.

Before you go Suzanne, the short answer is we absolutely take it into account and have taken into account since inception, which I think is a unique approach to BAM and Suzanne will tell you what we do.

Yes. So when we launched in 2012, we recognized that the growing pension and OPEB liabilities were going to be a significant credit factor. So we hired a pension actuary who has substantial expertise, in fact, was a consulting actuary to the city of New York when they were addressing a lot of their pension issues. And so for each transaction that we insure or we review, our pension actuary goes through, looks at all the pension data, and we've created a metric that puts those pension liabilities on the same footing as their debt. And then we look at that combined liability to determine whether or not that's affordable. And so there are credits that we have noninsured because we felt that those liabilities were too significant.

Just a question for you, Manning, about HTG. What are your expected returns on this investment?

Yes. I think HTG right now is running at a high single digits ROE, measured in terms of its contribution to compounding ABVPS for White Mountains. And I think that's where we are. I think there are things we can do around the margins to improve that, but I see that as marginal and not a step change. So that's the number I would steer you to.

Is that sort of below your threshold in some...

It's below our threshold, but not radically below our threshold. It's above the return on undeployed capital and below what we've targeted in terms of 10-year T plus 700. So we're working on it and trying to squeeze it for every ounce we can get out of it.

Manning, could you please update us on your kind of exit strategy for your investment in HG Global kind of timing of it.

Sorry, I didn't understand the question.

No, what is your exit strategy for your investment in HG Global and the potential timing of it?

My answer for HG Global and BAM would be the same as my answer for any business that we're invested in, which is we don't have an exit strategy. And if somebody comes along and makes us an offer that's compelling, we'll absolutely listen. But until that happens, we're going to own and operate this as best we can.

And technically, given the mutual structure of BAM, would it be kind of more complicated? Or how will that work?

It's a good question. So the question is, how would you execute and exit if we desire to. We own 97% of the shares of HGG, which is the top holding company of the HG Re structure, which includes the reinsurance business and the surplus notes. We could sell those shares if we chose to, in a clean, simple transaction. And somebody could step into our shoes. That's the simplest thing. There are other variations on that theme, but that's the simplest technical approach. Okay. All right. Thank you, Kevin. Thanks, Suzanne.

All right. Shifting gears. We're going to talk a bit about Kudu. I'm going to introduce Rob Jakacki, who's the CEO and Co-Founder; and Charlie Ruffel, Managing Partner and Co-Founder. And just a reminder, Kudu is a business that provides capital solutions and advisory services to boutique, asset and wealth managers. It targets what we call the middle market, which is typically firms with AUM between $2 billion and $10 billion. The capital is used for any number of purposes, some of which you see listed here. And when Kudu deploys capital, it receives back what we refer to as a participation contract, which is sort of a mouthful but it's typically a revenue share in the revenues of that asset management company plus equity participation rights to flip into equity participation in any corporate event that, that company might undergo, and we've had a handful of those now in the history of Kudu. Kudu has grown really nicely since we first invested in 2018. It now has a portfolio of 23 investee companies that span a range of formats, strategies and geographies. It's very well diversified with some emphasis on private capital and wealth management businesses. It's got a robust deal pipeline. It never ceases to amaze me how much volume there is, how much interest there is for the solution that Kudu provides. And Kudu has plenty of dry powder today, including the incremental commitment of $150 million that we've made. So with that, Rob, floor is yours.

2023 was a very strong year for Kudu on a variety of fronts. From a capital standpoint, we saw a steady deployment of capital and some new managers. We saw the strengthening of our existing portfolio as it grew over the course of the year. We saw our first meaningful participation in carried interest from our portfolio. And we also saw a significant derisking of one of our portfolio investments by way of a partial liquidation of that firm. So all in all, led to very strong positive financial results. As you see, we exhibited a 12% levered return on our portfolio. That's our metric that we use to describe our recurring yield of the business. That's an improvement over the 2022 results, driven primarily by the seasoning of the portfolio and new investments that we put on the books at around 10% out-of-the-box yield. All this contributed to a GAAP ROE of 17% for the year. Now this metric does include realized and unrealized gains on the portfolio, so will exhibit more volatility but overall, very good financial results for the year. As I mentioned, the portfolio saw some strong growth, a 15% same-store year-over-year growth pattern, which was fueled by the diversification benefits of the portfolio, the enhanced position of carry across our portfolio investments. All contributed to those strong results. On the origination front, we put about $170 million of capital into 5 new managers. This is slightly ahead of our historic deal pace. So that was a strong result on that front as well. New investments into 2 specialty private equity managers, a private credit manager, a fast-growing fixed income manager and a manager of diverse credit strategies distributed into the retail channel. As we roll forward into 2024 and through Q1, that levered return showed a consistent 12%. So that is encouraging to see that kind of stability in our yields, which we like to see. The ROE number of 13% showed some softening, which is really driven by the rolling off of a realized gain that we reported in early 2023 as that metric is on a trailing 4-quarter basis. But overall, still very strong results through Q1. All this consistency of our cash yield is important and what we underwrite to. As we look at our portfolio and where the marks are today, we're encouraged by more than 3/4 of our portfolio tracking at or above original underwriting expectations. So that's also very good to see. All that is enhanced when we do see outside growth opportunities at the individual portfolio companies themselves or when they experience a liquidity event. As Manning said, we've seen a few of those over the past few years. We've seen 2 full exits from our portfolio, which generated IRRs to us in excess of 30%, so wildly successful returns on our capital. We've also participated in 3 partial monetizations where we've completely derisked our invested capital, but still retain potential upside through our retained stake in those managers. Next slide. So this is a busy graph, and one we've shown you before, but I just want to point out a few things here. The top line shows that, that ROE, which does move around a little bit with the inclusion of realized and unrealized gains. The line below it is our levered return metric. This does show a more steady and upward trending pattern, which is what we like to see. And as I said, we like to see that to increase over time through the seasoning, but in a relatively stable fashion. The columns below show our capital position across time. And for the color blind folks in the room, I'm going to work with White Mountains next year to maybe come up with a different way of positioning this, because I can't refer to the specific colors. But the bottom portion of the columns is the net equity that we have over time with outstanding debt in the shaded area above that. You see that number has been pretty consistent, which shows how we've been managing our debt position in a rising rate environment. And importantly, the shaded area above that, in some mysterious color, is an important one to point out. This is our realized retained earnings of our portfolio over time. As this metric builds and this cash flow builds, this allows us to reinvest those cash flows into new investments, thereby enhancing the shareholder capital that's been invested. And as we look forward, this will enable us to continue to maintain our investment pace off our own steam without the need for outside capital. Where we are today, we probably have the ability to fund 2 to 3 new investments on free cash flow alone. We're probably not that far away from being able to maintain that historic pace off of our free cash flow. So that fact alone, while exciting, it further differentiates us from our peers and really expresses the essence of the permanent capital model that we espouse.

You noted in the slide before this, 18 of the 23 remaining investments are in line with your initial underwriting or better. We don't know the weighting of these investments, but maybe 25% of the number of investments are below, I guess, initial underwriting. And so the question is, what's the pattern of the underperformers? What have you learned doing this for many years and then I guess, thirdly, how do you include those in your calculation of the look-through value in your annual letter.

So I'll take the first part of that, and Manning can handle the last. So if there's a pattern to point to across those that are underperforming. And I would say, of the 5 that aren't in that group that are at or above, there's probably only a small number of 2 to 3 that we would be having our eye on in terms of the challenges that they face. I would point to COVID as a reason for some of that underperformance, an investment in a commercial real estate manager here in New York was probably not the greatest place to be in COVID, but that manager is finding ways to not reinvent themselves, but to apply their capabilities in new markets. And we are confident that, that will rebound and get back to where we had originally hoped. Other than that, I think there's just episodic activity and that's the benefit of the diversified model.

I'd answer the first question as there's no single reason. There are idiosyncratic reasons across the 4 or 5 that have underperformed. And frankly, that's what you get. Second question on how we handle the marks. We mark all the participation contracts to market quarterly. And if a given portfolio company is underperforming, either it will not accrete at the rate we originally forecast in the model or in a more severe situation will be written down.

What is the cash on cash return before leverage?

So there are a couple of different ways to answer that. The cash yield that we target out of the gate on a new investment before leverage is 10%, but that's a revenue yield. So when you then take '23, '25 positions, take that revenue yield, you've got to deduct the OpEx of the business to get down to your contribution margin yield. And the overhead of the Kudu business is actually quite small relatively, and you can see the operating leverage kicking in on this chart. Does that answer your question?

What are your thoughts about the private equity world and the marks in the portfolios, which affects your business? And then if you can share what your thoughts are on your portfolio as well.

Yes. I mean, we read the same articles. So we're aware of some of the pressures and challenges that PE managers face. We focus very closely with our portfolio companies and companies in our pipeline to understand as best we can those marks and what's real and what's vapor where. And we feel that our managers do a pretty good job with that.

Do you have any thoughts about the industry, though.

I have many thoughts about the industry, in particular.

Would you like to share them, specifically about how and where the industry is as it relates to marks because they're basically are not marking to market.

Well, that's your opinion about the industry. And we appreciate you sharing that. I don't know if you want to comment on that or not believe that alone. With respect to White Mountains, we take the mark-to-market exercise at Kudu and everywhere else where we have mark-to-market challenges and there will be a couple of other positions we're going to talk about in a minute, take that exercise very seriously. We try to stay on the conservative side of the 50-yard line. And I think history would support that we've done a pretty good job of it and in particular, at Kudu, all 5 exits now. Admittedly, there's a selection bias on focusing on the exit, but all 5 exits have been at valuations considerably north of where we had marks.

Sorry, Manning, just a clarification. When you said earlier about the portfolio marks and you said mark-to-market, do you mean to mark-to-model.

Yes. That's a probably better phrase.

And on the 5 sort of underperformers or even the 2 or 3 truly poor performers -- are they still generating cash yield? I mean these are revenue participation contracts. So you're not...

Absolutely. And these are healthy businesses.

Are these like better than T-bill kind of rate like cash yields? Or these...

Yes.

You mentioned a healthy pipeline and clearly, White Mountains feels the same way with the additional commitment. Can you give us a sense of what you're excited about for the pipeline? And then secondly, I know Charlie knows Charles Schwab quite well. The growth of the RIA space has been really impressive. It seems to fit potentially with what you do. Obviously, private markets value those very highly, especially compared to some of the asset managers in the public markets. So does that fit into your planning at all in the future?

Yes. No, on that last point, the RIA industry or segment is very much a part of our vision. It's probably about a 20% representation of our portfolio today. We actively look for new opportunities there. It has become a challenging space to execute in with a lot of private equity dollars going after those opportunities too. So our success rate maybe has tempered a bit. But not only as the contribution to the portfolio, which we think has real benefit, these types of businesses, but also the ecosystem that we're building where these RIAs are a natural consumer of alternative managed products. And we're actively contributing to both sides of that.

I think it's fair to say, correct me if I'm wrong, but most of our RIA positions were put on early in our investment period with Kudu. And frankly, we've been priced out of a lot of deals over the past few years as valuations have crept up. Like the space, don't like the prices.

Maybe, I can take the second part of the question in terms of what's attractive out there? I think there's a surge in the alternative space, obviously, private credit most recently, I think the secondary market is a space where we really see some interesting managers. I think as this market evolves, more and more sort of interesting managers emerge, which we can take stakes in and the opportunity for boutiques to excel in areas like secondary and private credit is really substantial. There might still be some juice left in the RIA marketplace. We really like it, the new investors in it all the time, but it is an expensive market now, and there's a strong yield component to what we do. So we're cautious about it. We're looking at RIAs actually outside the U.S. now, and we'll see where that takes us. But in terms of the most exciting stuff, I think it's in the in these -- none of these are new. The secondary space is not new. Clearly, private credit is not new. But there are a lot of really interesting boutique managers who are really drawn and Rob touched on this, too. I think what separates us from everyone else, which is the permanent capital structure behind us. So I think we have a really interesting 5 years ahead of us.

How should we think about scaling the portfolio? How many investments could the team today make and do you want to keep redeploying all earnings and liquidity events back into the portfolio?

Yes, that's a good question. We think about quite a lot. Our natural pace has been about 3 to 5 new investments a year. We're absolutely built to handle that and maybe more. But that's kind of been where things have leveled out. As an overall point of view, I think we do have to think about human resources as a constraint, not just on the origination side, but on the partner engagement side as well. That has been a big focus of ours over the past few years, is really investing in resources to help our partner firms achieve growth and become stronger institutions. That level of engagement is real and requires real time and energy. So I don't think it's unlimited to the sky. As we think about the capital availability and the human resources, we think there's a lot of room to grow.

In terms of free cash flow utilization decisions, capital management. At the White Mountains level, we seek a 3% cash yield on all of our deployments every year, just as a baseline. On Jackson theory, the capital has to eat. But above that, at Kudu, we want to redeploy every dollar available. And that self-funding capacity, which Rob touched on, where they can now do 3 deals a year just off their own, free cash flow is very important. It means we're playing a very strong hand vis-a-vis capital options out there in the universe.

And would you like to maintain the deployment size or you're just generating more cash every year. Are you going to start doing larger deals or...

Our market that we focus on, the middle market, is a pretty -- we focused on it for some specific reasons, not just check size. We think this market is where you're going to find the best risk/reward opportunities in GP staking. So just growing the portfolio because we can write bigger checks is a possibility, but we want to be ever focused on that marketplace, that market segment. So I think that's a big consideration for us as we grow, too.

Okay. One more. Make it a good one.

There's really no public comps for this business. It's not a bad thing. It's a lot of minority stakes, kind of a portfolio of contracts. How do you envision unlocking this value over 5 or 10 years from now? I know there's a relationship with MassMutual, but have you explored kind of ways to unlock that value in the past?

Yes. I'd give you for starters, the same answer I gave on HTG and BAM, which is, we do not have an exit strategy. We don't come into it with one. We don't make one up after we get in. This is a business that I think is a very good business for White Mountains to own indefinitely. It compounds our book value per share very nicely over time. And when you include for GAAP purposes, the step-ups that come with unrealized and realized gains, it's sort of a mid-teens returning deployment for us right now, and we love it, we'd like more of it. To the extent that you're asking a valuation question, I'd just point you to the deal that we did with MassMutual, where they came in at a modest premium to the aggregate portfolio value on the books at the time we did the deal. So that's one way to sort of triangulate what you think a private market value for Kudu might be. And in terms of how. If we did choose down the road to monetize this, what would that look like? I think there are all kinds of possibilities and time will tell. Alright. Thank you, Rob. Let's turn now to Bamboo. Liam?

Thank you. It's good to be back. Let me introduce Bamboo, our newest operating company as of January of this year. Bamboo is an MGA focused on the California homeowners market, founded and led by John Chu, who's had a long and distinguished career in the insurance industry across companies, including the Hartford and Pacific Specialty. Joining John today are Taylor Mobley, Chief Financial Officer and Chief Commercial Officer; as well as Brian Suzuki, Chief Insurance Officer. As you've undoubtedly read, the California homeowners market is severely dislocated at present, to put it mildly, with incumbent carriers unable to achieve rate adequacy on their products and therefore, non-renewing customers and not agreeing to write new customers. At the same time, people need homeowners insurance. So there's a massive supply/demand imbalance in the state in terms of folks being able to get coverage. So then the question becomes if everyone is getting out, why can Bamboo succeed where others are exiting. And I'd say there's 4 competitive advantages we see to Bamboo which attracted us to this deal. The first is recency. Bamboo is a start-up, launched after the wildfire seasons of 2017, 2018, came in with a rate adequate product and have leveraged timely filings to keep up with rate adequacy. So they can achieve adequate rate whereas incumbents have a legacy debt there. Second, it's a modern platform, built from scratch using the latest technology platform, so the agility, the lean cost structure, is an advantage in the market. The responsiveness, the ability to use data and analytics and the latest technology in terms of underwriting, distribution and servicing clients. We believe it's well positioned. First off, it's open for business in a situation where 70% of carriers are not open for business, in both admitted and E&S markets, with a focus on what I'll call middle-market homes and non-wildfire exposed areas. And finally, we believe it's well structured. It's an MGA model. It's a model that we know well at White Mountains from our days with NSM, with a blue-chip reinsurance panel behind it. I'd say the other thing for us is this is probably a good example of modern deal sourcing at White Mountains. In the old days, people pick up the phone and call it Jack, and that's how we got deals. We're still not what I'd call thematic investors. We don't kind of have a heat map and say, we like this, and we don't like this. We're opportunistic because ultimately, I can have a strategy for anything, but there's not a deal to be had in good terms, it doesn't really do me any good. It's just theoretical. But this was a case where we saw the dislocation in California. We said there's got to be an opportunity there. And we problem solved a number of different ways and structures and potential deployments that we could use to take advantage of that. And as part of that, we met John and the team. And I think we both saw the opportunity to take a model, a start-up that was well run, but could really utilize the expertise that we brought the capital that we brought to accelerate that strategy. So this was a great example of having an idea, developing pipeline based on that and then being able to execute a deal on the back end. Again, this is what I'll call an opportunistic entry point given the dislocation in California, but as John will touch on, we also view this -- this is a sustainable model. At some point, California will revert to a new normal, not necessarily old normal, but a new normal and we believe we're building a model with Bamboo that's sustainable in that new normal. And then finally, the other thing I'd note is on April 1 as part of Bamboo's 2024 treaty reinsurance year, White Mountains committed up to $30 million through a collateralized reinsurance vehicle to participate on the reinsurance panel for 2024. The logic here was, in a world where greedy reinsurers are charging high rates, if you can't beat them, join them. So on a stand-alone basis, this is an attractive return for White Mountains, full stop. That's why we did it. But I think it also had some ancillary benefits for John and the team. One is, it's a sign that we're willing to eat our own cooking of White Mountains in this case. And second, I think having committed capital from White Mountains has helped John as he filled out the rest of the panel in terms of terms and conditions being able to have that committed capacity behind them. But full stop, we think this is an attractive perspective return. It's a 1-year commitment similar to Outrigger, that we'll evaluate going forward. So that's a bit of an overview on Bamboo. Again, we've consolidated Bamboo and reported their results for the first time in 1Q '24. Touch on some of those results and also some trailing 12 metrics that include financials prior to our ownership, what we think are directionally instructive in terms of the scale of the business and the pace. So managed premiums in the first quarter of $90 million. And on a trailing 12 basis, $277 million. Both of those were up roughly 3x versus 1Q of '23. Adjusted EBITDA in the MGA of $6 million in 1Q and $15 million on a trailing 12 basis and continued strong underwriting results. Again, one of our founding principles from Jack is underwriting comes first. This is not growth at the expense of underwriting. This is good underwriting with good growth, and we will not -- and John and the team, having good underwriting results is most important in this business. And then at the bottom, just showing some of those numbers graphically, so you can get a sense for the scale. Trailing 12 premiums going from $95 million in 1Q of '23 to $277 million in 1Q of '24, turning EBITDA positive throughout the course of '23 from negative number in 1Q, '23 to now $15 million on a trailing 12 basis in 1Q. And then the last chart all we've done is just annualize the 1Q numbers. This is not meant to be a forecast, but just to give you a sense of simplistically, if you take 1Q and multiply it by 4, a little bit the ballpark scale of the business at $358 million of managed premiums and about $26 million of EBITDA in the MGA. So with that, let me turn it over to John to share some more detailed thoughts.

Thanks, Liam. First, I want to say on behalf of the Bamboo team and the existing shareholders who are extremely excited to be part of the White Mountains family. When I started Bamboo late '18, we had 3 core tenets that still exist today that we think is sustainable for the long term, who is leveraging technology being omnichannel focused from a distribution and using an efficient capital model. We started out in California because we knew the marketplace very well. We saw a number of secular trends within the property market that started to emerge as early as 2015 and '16. And then obviously, we're well on our way to profitability in '22, '23 and then the market changed. From a California marketplace standpoint, it allowed us to turbocharge our model, and it really secured what I thought we felt confidently in our business model and it showed that we were able to take advantage of a market that had massive dislocation. When you think about the headlines in California, which I'm sure you've all read, it was a perfect storm of inflation, brush fires, which was -- if you think about brushfire as a catastrophe, peril is still less than 10 years old. The models are not very mature. And because of that, a lot of the reinsurers built in some embedded costs that probably were higher than others. And because of those 3 things, it created a tremendous vacuum of rate for legacy carriers and somewhere in the neighborhood of 70% to 80% of the current legacy carriers do not write in California. And a lot of that is exasperated by what I would consider a turbulent regulatory market that's constant in its push and pull dynamic between the legacy carriers. The regulators themselves and the consumer advocate groups that have very strong lobbying in the state of California. And what that has done is created a vacuum for us to step into, to pick up market share at a profitable rate and can allow us to continue to grow and manage our book. In terms of what we see going forward, it's been public that the California DOI at the end of this year will put together a plan on how to go forward in terms of how to manage the environment. Just by history of knowing California through all the different Depops they've done over the last 20 years, I suspect it's an 18- to 24-month cycle before there is a new normal. As rate changes occur, carriers understand how the regulators work with them and just how the market environment settles in. Our intent is, and for the next 2 years at a minimum, to continue taking advantage of this marketplace as we grow on a profitable basis. But I do think in the new normal, even when things do reside into a different environment to what they are today, I do think there's tremendous opportunities on a go-forward basis to continue picking up market share in a profitable way. And that, again, goes back to the operating model, but almost more importantly is the relationships we developed with both our distribution partners at a time where agents have really nowhere to go, we've been there for them, and they remember that. I've been doing this business for 30 years and independent agents remember when you were there for them in very, very soft times. And importantly, the relationships we've built with our reinsurers as we've delivered what I would consider high-class returns, especially in a very difficult market like California where they haven't made money. So we intend to leverage those aspects as we enter new markets, which we see having similar attributes to California might not be as difficult as the regulatory environment, but we do see other states out there such as Texas, they have a similar profile that we think we can enter and pick up the similar types of market share and have similar results. So I guess any questions that you may have.

Would you please clarify what you mean by new normal? It means like post reforms, there is like reforms, which you mentioned are pending which supposedly will address a lot of issues, you are understandably skeptical about it. But anyway, where do you see this environment in California evolving?

Well, I mean, again, there's many opinions, and it's just working and living in California for decades. This is a show that has been run before. I was actually -- when I was at the Hartford, we exited the California workers' comp market when they went through a very similar transformation where they became the largest workers' comp insurer and then they had to Depop it after a while. I see similar [indiscernible] here with the FAIR Plan now being one of the largest insurance companies in California. And as things start to change and the regulators loosen up, well, you have this balance of regulators along rate and managed against the consumer advocate groups that have, again, strong lobbying jurisdictions against having that amount of rate come through. And so if you're a primary market and you want to enter the market, well, you want to enter the market at a certain level of rate adequacy. But as I said, the perfect storm of inflation, reinsurance costs and brush perils created a vacuum of rate. And so for each carrier, it's dependent on when they reach that level of confidence that they have the rate that they can write again. So what I suspect in the new normal is they'll write where they think they can write. And so it's not like they'll be open in 100% of the ZIP codes. They might enter only 20% as an example. And that's kind of what we've seen before in the market. So that's what I could say the new normal is they will enter but interest-bearingly with very tight underwriting guidelines. So it always create opportunities for us to find the right pockets to grow.

And would you take more underwriting risk? I know you have like this captive, which takes some of it, if it goes away kind of as intended.

Well, again, going one of our core key tenets is to be capital efficient. We want to maintain the MGA status. We like the fee income. I think our reinsurer, where we take some position on a retained basis, will continually to be more complementary in nature rather than being a balance sheet per se. I think if it helps coordinate the level of performance we get from our reinsurance partners, we'll continue that way, but I don't see us being a primary insurer.

Yes. And I'd say from the White Mountains' standpoint, the main event is the MGA. Again, the captive exists to align interest with the reinsurance panel, but it's run on a breakeven basis. The main event is the MGA. Our deployment in the collateralized vehicle for this treaty year was an opportunist deployment. Its not a signal that we're looking to make this a full stack.

And you mentioned new products, what are those.

Well, so in the new product area, like Liam said, we've just launched our first non-admitted program, which is an H05, so technicality is -- our core homeowner product is an H03. We just launched our first H05 product. We have a few others like that in the queue over the next 12 months.

Okay. I'll go. It's a really exciting opportunity. You just noted that you started in California, how big is this realistic market in California for you all as you envision 5, 10 years. I know a lot can change, but just how do you think about the realistic market size for your business and not like the blue sky scenario, but like realistic?

Yes. Well, I'm not in the business of setting BHAGs for us. What we'd like to do is focus on delivering good results. I have found in this business, as Jack would say, unfortunately, never meant them, make underwriting results. And that's a balance of making sure you're doing the right stuff from a new business standpoint, making sure you're rate adequate, making sure you're building great relationships with your agents. And that would dictate the amount of flow we get. California is a gigantic market. Believe it or not, Texas is actually a larger homeowner market from a premium standpoint. So I think there's a tremendous opportunity for upside from a market size standpoint. And as long as we maintain our integrity and discipline on the underwriting side, I'm sure we'll grow properly.

Yes. And I would just add, from a White Mountains' standpoint, the business case was written on taking advantage of California, full stop. There was no assumption on expanding into multi-states. I do think there are opportunities over time to expand into other states, Texas being one. I think one of the beauties of that is in a model like this, one of the hardest things to build is distribution. What John and the team are seeing is actually existing agency partners that are in California asking them to come into other states and say, we have agents that want to work with you. That's a nice problem to have when you've got built in distribution there when you're entering a new market. So I think we'll look at those expansion opportunities over time. We want to stay focused on. The clear and present opportunity is California. That's what the business case depends on. Everything else is gravy and we'll be opportunistic, but maintain focus.

Sort of answered my question already, but I guess maybe on new markets, do you have any sort of time frame on when that might happen? And do you think, ultimately, they could be bigger than California if we look out 5 to 10 years?

Well, it's hard to say. I think -- we're building a great book in California. It's got a 4-year head start. So in terms of growth, I don't see other states at this juncture being larger in some capacity over the next couple of years. I think in time, there could be opportunities, but at this juncture, like Liam said, our focus is California. We'll continue to grow it. And we have a lot of opportunity right now in front of us.

In terms of your go-to-market, is it entirely through independent agents right now?

No. We have -- we built program or the company on 3 distribution outlets. Our first distribution is what we call our carrier partner channel. And we saw this secular trend, like I said, years ago. So it's companies like Allstate, Farmers, Nationwide. We have an exclusive for the USAA. So a lot of captive agents. As they exit the market, needed product for their distribution channels and their agents. And so we stepped in kind of a quasi black label type thing. And then we transitioned that into a core independent agent business. Primarily, we like the call center type models or the larger ones, ala, Goosehead because they have greater control from a pricing standpoint and a quality standpoint. And then 3 years ago, we bought First American Title's retail agency. So it gave us a national footprint, but it also gave us what we call our point-of-sale channel. So it's all types of real estate, family concerns, I think title companies, escrow officers, loan companies where we get leads from them, and we close that through our retail channel. So we have a multi-distribution channel. We're not direct as Liam mentioned. I ran a direct business and it's not scalable like it is today. It's too costly, and it takes forever.

Got it. And just a follow-up on the new normal question, are you saying that it would take that, in your view, it will take another 18 to 24 months for carriers to get rate adequate. And so rates will just continue to rise for the next 18 to 24 months until they get adequate and then beyond that, that's a new normal where rates are adequate and the business sort of gets back to...

As I said, I think there's at least 18 to 24 months before, I would say, even the new normal emerges. So again, every company is different. But if you go back over the last 3 or 4 years as the macro influences of the fires and the inflation and the reinsurance cost, while legacy carriers bear that burden. Some had less, some had more. So it's hard for me to predict. But if you are doing that, and you have 5 years where extended costs entered the market, but you weren't able to get the rate. Well, there's a gap. How long that gap exists and closes is anybody's guess. I think there's a significant period of time where we think we can do what we're doing now until that gap closes. But when does that gap close, it closes differently for the different types of insurers and depending on their appetite, the return threshold, it's hard for me to predict. I just know that, that's going to take a significant amount of time when you have the push-pull between the consumer advocate groups and the regulators.

And sorry, just lastly, would you consider going into personal auto, private passenger.

Again, right now, I think our focus is on personal home. I think personal auto is a different business. We have a tremendous opportunity in front of us. So at this juncture, it's not kind of in the road now.

From the Internet, Liam mentioned that, in Texas, you said agency partners are asking you to think about that. What is the opportunity there? Why? What's going on there that you might find attractive?

Well, as I said, we have a lot of carrier partner that we distribute through. They are looking at similar white label type stuff for us in Texas. Texas has gone through some new perils like Yuri and others that they didn't expect. So there's a number of surprises that happen there. It's not quite the regulatory challenges of California, but it has created an opportunity for us to think about entering that market. Like Liam said, the worst thing you can do is burn your way into a market by adversely selecting or pricing yourself. So having good distribution is key for us as we enter a market. The secondary reason we'd enter a state like Texas, if we do, over time, it's different perils. Our reinsurers would like that because it diversifies the risk perils that we have because as -- you know Texas has a lot of different perils versus California. So we think that also helps our reinsurers from a pricing and diversification standpoint.

All right. Let's pivot now to MediaAlpha. I'm going to introduce Steven Yi, Co-Founder and CEO; and Eugene Nonko, who's also here, Co-Founder and Chief Technology Officer, soon to be Emeritus; and Pat Thompson, who's Chief Financial Officer. Just hang on 1 second, Steve. So I'm just going to give a quick refresher on a couple of basic points and then Steve will take us through the business. First on what the business is because we get this question a lot. MediaAlpha is a customer acquisition technology platform. It operates in multiple verticals with specific expertise in insurance, P&C insurance, life insurance, health insurance. In simple terms, the platform enables advertisers to connect with and bid on potential customer traffic efficiently and transparently and MediaAlpha is a toll business, it takes a percentage of all the volume that it places through its platform. Second, I want to just refresh everybody's memory on White Mountain's interests in MediaAlpha, and this will take just a quick history lesson. We acquired 60% of MediaAlpha in 2015 for $36 million. In 2018, we sold a slice to Insignia Partners in a recap transaction. In late 2020, we IPO-ed the company under the ticker symbol MAX, and we sold shares in the IPO at $19 a share. In early 2021, we did a secondary transaction, sold more shares at $46 a share. And then in 2023, we went the other way, and we bought shares back in a tender offer at $10 a share. I'll circle back to that in a second. Today, when you cut through all those ins and outs, we own 25% of the company, and we mark-to-market the value of our ownership every quarter based on the public share price of MAX. And as you know, that's moved around a little bit. It hit a high of $70 a share in 2021, and a low of $5 a share in 2023. So if you had any residual faith in efficient market hypothesis, this will dispel that for you. So we think about our capital deployed in 2 pieces. The original deployment from back in 2015, which has produced really great results, 9x in cash and another 7x in the stock -- in the value of the stock that we hold. And then we just think separately about the tender deployment decision we made last year. And so far that looks good. We bought 5.9 million shares at $10 and then turned around and sold 5 million at $19 early this year. So that's the tale of the tape on our history with MediaAlpha. I'll stop there, and Steve will come talk about the business.

Everyone, thanks for that, Manning. I suspect that 1 of the people asking about what we do was, Jessica, my wife, because I think that she still quite doesn't understand exactly what we do and where I go all day. But overall, the story has been -- it has been a wild drive for the last few years, particularly since the IPO. For those of you who are familiar with the personal auto market, you know that the industry is now finally emerging from, I think what was a historically bad underwriting environment related to pandemic-related claims cost inflation, that increased claims cost in the neighborhood of 30%, 40% to 50% in most states. And so as you know, when this industry retrenches and takes rate, it's a process that can take a couple of years. When they do this, they take, in many cases, nonrate action. And in this case, with the severity of what happened, no pun intended, it took extreme non-rate actions. And for us, really, what that means is the major carriers just stopped advertising. And we saw that for the last 2.5 to 3 years. So this year, new year. I think everyone agrees, I think people here within personal auto and then the advertising industry really sees that we're on the other side of this market. Within our marketplace, I think the reaction that we're seeing from the carriers is, I think, certainly opposite and compassionate with the severity and the unpredictability of what happened over the last 3 years. And so here's what that means in our marketplace. It's still early innings of carriers, actually getting back into advertising. So there's -- basically, I'm saying there's a small number of major carriers who have really resumed their growth investments. But in very short course, what that's resulted in is pricing in most states, media pricing getting back to sort of pretty hard market levels, quite honestly, much quicker than we expected. And you're seeing volume remaining at elevated levels. And really, what that means for us and for the population as a whole is that there is an enormous amount of shopping behavior and shopping intent. And that's just because as consumers and maybe you all have seen it auto insurance prices have gone up by 30% or 40%. And so that spurs a lot of shopping behavior. And a lot of the shopping behavior, I mean, these types of pricing increases are really unprecedented. And so I think the increase in shopping behaviors, I think, is expected to remain for this year and next year. And a lot of carriers at this point, really want to take advantage of that. And so we're benefiting from that. And you're seeing that really flow through to our Q1 results, which were very strong, stronger than expected. And in our forecast or guidance for what we expect the second quarter to look like, which if you take the midpoint of that, is looking like it could be 1 of the strongest quarters in our company's history. So I think looking forward, really, the story for this year and next year is going to be growth and growth driven by the recovery of the P&C and the personal auto space. I think if you look beyond that, really what we're looking forward to is the story being less about the cycle and really about the secular shift that the overall insurance industry and personally, and I mean, specifically the sectors in which we play, which is personal auto, homeowner, under 65 health, Medicare Advantage as well as life insurance. Really, the story, I think, is about the secular shift that the industry is making tour away from agent-based offline distribution to direct distribution. Again, a lot of it done online. What we expect to happen is that, that's going to increase the amount of advertising that carriers do and then geometrically increase the market opportunity for us is a lot of these dollars then get allocated online.

We'll pause there and open for Q&A on MediaAlpha.

Maybe as a beginner on this industry and there is couple of other busy companies that seem -- there couple other companies that do something maybe similar. And I guess -- could you just remind us kind of what your kind of competitive advantage is as you kind of sell to, I guess, a smaller kind of group of customers? And maybe remind us sort of kind of how mission critical you are to these customers relative to what they're spending? And I guess, a long way of asking kind of the switching costs between using somebody like MediaAlpha for their advertising needs versus some of the other competitors out there?

Right. I think the biggest differentiator is that we're a marketplace. I know they're publicly traded competitors, companies like EverQuote, LendingTree are really lead generators of a base of agents that they're selling leads to, as well as media that they're also selling directly to carriers. Now we do compete for that media budget, that national carrier media budget. But because we're a marketplace and we work with hundreds of publishers who -- many of whom have similar business models to companies like EverQuote and LendingTree, the magnitude of the carrier investments are several times that of what the carriers are spending with these lead generators like EverQuote and QuoteWizard. And so I would say that, that's the biggest point of differentiation. And I think at this point, really I mean, we have essentially won the marketplace game in terms of aggregating the best and the highest quality sort of publishers in our marketplace. And so now it's just about the data and the plethora of data that the advertisers and the carriers have access to, to really refine exactly what they're paying for the media based on the expected lifetime value the consumers that they have access to. And that's really creating efficiencies that no other marketplace can match.

I don't know if this is a stupid question, but the world of AI is changing quite a bit. What are the applications that you see in what you do that could help you, both in terms of gaining market share and more importantly, retaining that market share on an ongoing basis.

Yes. Well, let me parse that a little bit, right? I mean -- and I don't think you're asking this, but a lot of people conflate AI with data science and predictive analytics. And so predictive analytics is something that's been happening in our space for quite some time, machine learning, et cetera. And that comes -- that's because we're a programmatic advertising platform. And so that's been used to really optimize advertiser campaigns for years, and we're at the forefront of that. And that goes to the data advantage that our marketplace has. In terms of generative AI, we've not seen that much of an effect on our marketplace in our ecosystem. I think in Internet advertising in general, I think what you'll see is that it will help with some creatives for advertising, but we're such a high intent marketplace that advertisements well, I guess, to add units within our marketplace really aren't creatively driven. It's just about getting the ads in front of very high-intent consumers where the advertisers know a lot about the consumers. They know what kind of cars they drive. They know whether they're a homeowner or not. And it's really that which drives the value of the media in our marketplace, and it's not very creatively driven. So from that perspective, we don't foresee that generative AI having much of a near-term impact.

Thanks, Steve. All right. We'll turn now to PassportCard and DavidShield. Let me introduce Alon Ketzef, Group CEO and Co-Founder. And let me just take a minute to recognize and commend Alon's remarkable leadership and character that he's demonstrated. First through a pandemic and now through a war. We're very grateful and lucky to have Alon as our partner. Just a refresher on PassportCard. It's a MGA for travel and expat medical insurance, which are delivered off of a common chassis operationally. PassportCard-DavidShield does not retain any net underwriting risk and that risk is ceded to its global reinsurance partner, which is Allianz. PassportCard-DavidShield delivers its services pretty much anywhere in the world, 200 countries, give or take. It provides its coverage and settles its claim in real time with no paper via a unique debit card solution. This is a radically better mousetrap in the industry, and it drives high levels of customer satisfaction, premium pricing levels for the company and high reactivation rates. Travelers and expats who use our product are highly likely to like it and highly likely to use it again, which is unusual in the travel insurance business, in particular. The business was launched in Israel, and it remains Israel centric, which means that most of our customers, especially in the travel sector emanate from Israel. Our long-term goal is to deliver -- is to stand up new customer markets around the world because we can deliver the solution everywhere in the world already. It's about standing up new customer markets. And we're doing that selectively targeting markets that are large, accessible and that have customers that value the unique attributes that we deliver, chiefly the health insurance solution. We're currently focused on 2 international initiatives, expat medical in Europe, and leisure travel in Australia, and both of those businesses are growing quite nicely. I'll stop there and invite Alon to talk about the business.

Thank you, Manning. Nice to see you all. Some new faces. I'm happy to be 1 of the veterans here by now. So we are partners for since -- full partner since 2018, and we didn't have 1 good year since 2019. I'm sorry about that. But here we are, and we do have the best mousetrap in the industry by far. And as such, we are committed to become an industry leader. We are the leaders in the domestic market in Israel with extensive market share. We have the best underwriting results in the market. We have the highest NPS score in the market. And we have the highest rates in the industry from the insurance commissioner year-over-year. We plan on doing it in Germany and in Europe, and we plan on doing it in Australia. Germany is showing first signs of success and hopefully, it won't take long before as we say, the soldiers starts to come home, meaning cash flow positive in Europe. And in Australia, it has been launched in, again, in last year, less than a year ago after we had to shut it off during COVID times. So it was a bumpy road. It's still a bumpy road. 2023 was about to be another record year. We were aiming for the 250 million mark. And then came October 7. And unfortunately, we got into the situation of war and the business, of course, was hurt by that. And with 700 people on board, you hear all the stories. You hear all the stories, you have people going to war, you have people that spend time in the festival. We had 3 employees over there, 2 of them managed to escape, 1 didn't. Every day, you hear new stories. We had to deal with the situation. We had to hire psychologists on sites that treated the employees. At the time, Manning and I made a decision not to cut on expenses, not to send any employee home regardless of the fact that volume went down dramatically during Q4 of 2023. And with a capacity of $300 million in the plan, we went down by 90%. So at that point of time, we decided to take the employees that had nothing to do. And clearly, we're depressed. And we set up a control center, and we started to send them in groups of 5 to 10 employees to different civic centers around the country to give a helping hand to the local communities there, especially communities that were evacuated from the Gaza border and from the northern part of Israel. We are very proud of that because it did create a sense of comradeship, sense of brotherhood, 1 for all, all for 1. And the company now is as strong as it can be in terms of chassis. All we need is just clear highway to move forward and some stability. So we are ready for that. And I definitely -- I don't know when the war ends, but I do know that once we get from the other side of the tunnel, we will be much stronger than we were before. Market share is still growing despite the low volume -- lower volume, I would say. That now is driven not by shortage in demand but rather shortage in supply. Not enough airplanes are landing in Israel. It's 100% of the seats are taken therefore prices have doubled. So we expect the airlines to come back within the next few months. Hopefully, the situation will get better. And we will start producing the numbers we planned on going forward. That's the situation. If you just show our roller coaster. So as you can see, the numbers in front of you. We were planning for the 300 mark and we will have to wait a bit longer. Maybe next year, I will stop by in London on my way here to learn few jokes from Ian. Unfortunately, this time, I cannot tell you any jokes, but I can assure you 1 thing, you have the best company in cross-border health insurance. And we will grow. We will grow in the new markets and we will keep our leadership in Israel. And let's hope for some good news -- time for good news. Thank you.

Thank you, Alon. I'm going to add a couple of comments on this slide. The first comment I want to add is, this visualizes the relative severity of the pandemic and the war. And the pandemic for us was far more severe because travel -- leisure travel worldwide went to 0, which you could see in the 2020 bar. When you contrast that to what we're dealing with war, first of all, all of our -- our expat medical businesses were not affected. Our businesses away from Israel were not affected. All of those businesses have continued to grow. So it's really just Israeli leisure travel which is in question. That's the biggest line of business, but it's not the entire business. And second thing is that, that number did not go to zero. In October, the number fell to something like 30% of the volume year-over-year, but we're now running at something like 70% of volume year-over-year. And as Alon said, it has nothing to do with demand at this point. It has to do with supply. And if there were the same number of planes coming in and out, you applied our market share and could triangulate we'd be running at 120% of volume year-over-year. So this is a matter of when, not if. This is going to come back online, and we're going to come roaring back on the travel side. And meanwhile, continue to build our businesses away from Israeli travel. So with that, let me open for questions. Great job. No questions. Thank you. All right. Thank you. Elementum. So in the interest of time, I'm going to cover Elementum quickly. I do want to introduce our friends from Elementum who are here. Tony Rettino, Senior Portfolio Manager and Founding Partner; John DeCaro, Senior Portfolio Manager and Founding Partner; and Mike France, Managing Partner and Chief Financial Officer. Just to remind everybody, Elementum is an asset management business. It manages assets for institutional investors in separate accounts and commingled funds. And it takes those investments and puts them primarily into insurance-linked securities. Most often CAT bonds and collateralized reinsurance. It's fee model is just like any asset management company, earning management fees and performance fees. One thing I would note is with some of the dynamics in the turnover in the investor base, which we'll talk about in a second, performance fees have become a more important part of the overall revenue picture at Elementum over the past couple of years. White Mountains owns a 27% stake in the business, the management company of Elementum, and that's the main event for us. Separately, we've also made a decision to invest some of our parent company investment portfolio into several of the Elementum funds. We do that because we like the returns. They have an attractive risk return profile. They're generally liquid and they're a nice diversifier in terms of what we're doing overall. So in terms of results, Elementum had a strong 2023. The key metrics for the business are AUM, net revenues and EBITDA, all those numbers were up nicely in 2023. The key driver really was strong returns in the funds, that were driven by a lot of the same factors that Ian has touched on, these are in overlapping markets. And so strong rates in property CAT and relatively low severe CAT year anyway drove good performance results. Our investments in the funds were up 16%, for example. 2024 off to a good start. Conditions for investing remain quite positive and risk-adjusted returns are attractive. As I touched on, there does continue to be some turnover in the investor base. We are seeing greater interest from endowments and foundations and hedge funds. And on the other hand, we're seeing a bit of a pause from the global pension community and the interest that we are seeing tends to be barbell, either in low risk, high liquidity vehicles. CAT bond only typically or in higher risk, higher return, illiquid CRI strategies. And Tony and the team have done a really nice job of tailoring the products that we're delivering to sort of meet and address that investor demand shift. So I'll pause there if there are questions on Elementum. I'm happy to take them. Great job by me. No questions. All right. Next slide. White Mountains Partners. This is a new venture. We launched it last fall. And the basic idea here is simple, which is to take the White Mountains approach to capital deployment, and extend it to targeted sectors beyond insurance. So long-term deployments, indefinite hold periods into family founder and entrepreneur-led businesses. The same thing we do all day every day in insurance to do it in some targeted sectors away from insurance. We're focused on 3 sectors. You see those here: essential services, that would be something like paving or property restoration; light industrials, which would be something like steel fabrication or packaging; and specialty consumer, something like toys and games and arts and crafts, that sort of thing. And so 1 question we've had from different places is why are you doing this? And when we were scoping and evaluating this project, 1 of the things I kept reflecting on with was 1 of Jack's old sayings, which is, sometimes our shareholders would be better off if we just all went and played golf. And that was his sort of pithy way of saying that opportunities in the insurance sector are cyclical, highly cyclical, that's true in many industries, but it's very true in insurance. And they come and they go. And to be successful in what we do at White Mountains, you've got to swing hard at the fat pitches in our core sectors. I think we've done a decent job of that over the last 5 years. But you've also got to let the bad pitches go. And there are times in the insurance sector where the next big deal is not obvious. And if you're chasing it, you're making a mistake. So from that perspective, I think it's -- there's a lot of potential value here from a White Mountain shareholder point of view to have a diversified deployment platform noncorrelated with insurance, subject to the execution risk, and that's the key. And so what's -- we've kind of explored this idea over the years and time sort of dabbled with it on the margins. But what's different -- the big difference this go around is the focus and the leadership. And we're very fortunate to have brought John Daly on board to lead the initiative. John was a founding team member at Alleghany Capital. And essentially, we've handed him the same brief, which is to build this platform in the same way with the same principles and same objectives as was done there. In terms of execution, we're going to approach this 1 deal at a time. We will be focused and rigorous and disciplined with everything we do. If we execute well, we expect to build a business that will compound per share values in the mid- to high teens. And that works. John gets a pass on presenting this year, but he'll be on the hot seat next year with a dealer to under his built, I'm sure. And I'm happy to take -- big picture questions on partners now. I'm happy to take them or John can chip in. But if you want more detailed stuff, I'd encourage you to hold your fire and pick up John or me or a member of their team inside bar afterwards. So any conceptual questions here? All right. Hearing none, we'll turn to Investments. I want to introduce Jonathan Cramer, who I think many of you may know, but maybe not everybody. Jonathan has been with us for more than 20 years, all in the investment shop, working his way up through White Mountains Advisors. He took over as Chief Investment Officer in 2022. And he's just nailed it. He's done a great job and the results are terrific. It serves to take a bow. So come take a bow.

Thank you, Manning. So the first slide is an overview of our reminder of our philosophy and approach. White Mountains has maintained a consistent approach to investments for a number of years. And our objective is to maximize long-term total returns after tax while taking prudent levels of risk. Policyholder funds tend to be invested more conservatively, generally in high-grade fixed income. And shareholder funds tend to be invested more aggressively. When we roll it all up and look at the total investment portfolio relative to insurance peers, we generally have a shorter duration fixed income portfolio and a higher equity exposure. It's important to note that we do not make investment decisions in a vacuum, as Liam mentioned earlier. Parent investment decisions are highly dependent on our capital position and our corporate needs, and we incorporate those in constructing and managing our investment portfolio. Our total portfolio at the end of the first quarter was $4.1 billion, $3.2 billion of shareholder funds, and roughly $900 million of shareholder funds -- sorry, policyholder funds and shareholder funds. On the next slide is an overview of our portfolio positioning as of March 31. Today, we have 3 distinct mandates managed very differently. The first and largest mandate is the Ark portfolio, $2.5 billion as of the end of the first quarter. The objective here is to provide sufficient liquidity to meet insurance needs, while managing for total return. We currently have a large fixed income portfolio, as you can see here, with a short duration and an average credit quality of A+. And we also have roughly 20% of the portfolio in equities and alternatives with relatively low beta. The second mandate is the HG Global portfolio. This had a value of roughly $600 million as of the end of the first quarter. The objective here is to preserve claims paying resources in support of our reinsurance arrangements with BAM. We currently only -- we only have high-grade fixed income in support of our reinsurance arrangements with BAM. This portfolio cannot invest in equities. And the third mandate is the Parent portfolio. This portfolio had a value of roughly $1 billion as of the first quarter. And the objective here is to safeguard amounts backing our known capital commitments and invest the balance, including undeployed capital for total return. We had roughly 45% of this portfolio invested in equities and alternatives at the end of the first quarter with a balance in short duration, high-grade fixed income. When adding it all up on a consolidated basis, we had $3.2 billion in generally high-grade fixed income, and roughly $900 million in equities and alternatives at Ark and the Parent. These are our investment results on a management basis for the last 2-plus years. As you can see in the far right column, we've outperformed all benchmarks over this period. Our shorter duration and exposure to floating rate instruments helped us outperform the Bloomberg, Barclays Intermediate ag over this period. And as a reminder, our equity portfolio is comprised of 2 main components: liquid ETFs that track the S&P 500; and alternative investments, including market neutral and private equity funds. Over this particular period, the PE portfolio outperformed by a lot. 2022 was a poor year on an absolute basis, but an excellent year on a relative basis. 2023 was an excellent year on both an absolute and relative basis. And so far in 2024, we're up 1.3%, a good result on both an absolute and a relative basis. Our shorter duration has benefited our fixed income portfolio, while mediocre results on our market neutral and PE funds has caused us to lag the S&P 500. We're pleased with the performance over this period, and we hope for more of the same going forward.

Questions for Jonathan.

What is your commercial real estate exposure across your different asset classes, including like alternatives and fixed income?

Yes. We really don't have any. Our only real exposure would be through any corporate bonds that we own in the banking sector, the regional banking sector, but sat towards de minimis.

And nothing on alternative investments?

No direct commercial real estate exposure to alternatives.

Jonathan, just curious, how did you manage to make 8% in 2022 in equities?

That was -- as I said earlier, it was strong returns from our private equity portfolio. We have a core group of private equity managers that we've supported and will continue to support, and 2022 happen to be a very good year for us.

All right. Thank you, Jonathan. All right. Wrapping up what to expect going forward. We show this slide every year. It's more of the same. Again? Yes. More of the same. The only thing I want to call out here that's different is the next to the last bullet. You've met -- been introduced to John and Giles today. We're delighted to have them on board. We've also been investing across the organization at all levels. And I'm very pleased with our human capital base stands today. I think the company is in the best shape I can remember in a long time in terms of the group of people we have leading this at all levels. We're in great shape. Next slide. Wise words here from Benjamin Graham. We think about him in everything we do. And last slide, here's the track record over 35 years, which we're quite proud of. I'll pause there. And if there are any final questions, I'm happy to take them.

Can you recap for us how much -- I think you call it access excess capital. Is that your terminology? Where does that stand right now out of that $600 million of under...

Yes. The concept of excess capital, I'm not sure if that's ours or VJ's. But we tend to distinguish and the capital we have that's undeployed between 2 pools, and this is all rough. But the capital that we don't think we have a realistic line of sight to deploying over the next, say, 3 years and everything else that we do think we can deploy. The access excess, we are probably looking to return to shareholders and probably in the form of a share repurchase. And frankly, with those amounts, you're slightly less price-sensitive. And from a financial theory point of view, you're willing to distribute it to repurchase up to book value per share, which is the financial equivalent of a special dividend, simple. With the other amounts where we are more price sensitive and we're in the business of comparing and contrasting the trade-offs between a new deployment into something like bamboo or a repurchase of stock and the economics implied by that. So that's how we think about things. In terms of access excess, I mean, clearly, when we were in 2017, the chart that Liam showed upfront or even when we were in 2022 post NSM, we had significant undeployed access excess capital on hand, and that's why you saw us do the tenders of scale. Today, I don't -- we probably have a little, not a lot. I can see line of sight to getting $600 million deployed over the next 3 years between our traditional insurance deals and what we're bringing on with partners. Of course, the trick is that the $600 million that we're carrying today is not a static number. And there are lots of things that could increase that ordinary course operations, of course, but any number of corporate events that could take place down the road. So today, I'd say the short answer to your question is not a lot. Rob?

Some various questions from the Internet. Would you consider splitting the stock given low trading volumes today and the number of relatively small number of shares outstanding?

Yes, we get that question from time to time and our immediate reaction is always the same, which is that as Jack always said, we keep the share price high to keep the riff-raff out. But more seriously, it's important to understand that we just spend 0% of our time attempting to manage or orchestrate the share price performance in the short term. We just don't care. We spend 100% of our time focused on growing our per share values, and we're confident that if we do that, the share price is going to track over a long period of time in this chart, shows you how that works over 35 years. And so we'll keep doing that. Whether a share split would meaningfully improve the liquidity, at least in terms of aggregate dollars' worth of trading, or what the other consequences of a split may be. To me, those are open questions. I mean I hear them, but the answers are not 100% obvious to me. I would say that if we reached a point where the stock price created an impediment or an obstacle for our long-term shareholders in holding or on holding the stock, then I think we'd have something to seriously consider. But that I haven't heard yet. And so for now, I just don't think a stock splits on the table.

Here's another question. In the 10-K and the risk factors, 1 of the risk factors relates to -- could White Mountains share -- a risk if White Mountains shares were determined to be a PFIC, a passive foreign investment company, and the question is, can we elaborate on the likelihood of this occurring? And is there any push by any regulator to define White Mountains view?

I can take a stab at and ask Dave, our Tax Lead to correct me if I get it wrong. But -- so the passive foreign investment company act basically means if all you're doing is holding passive investments as a foreign company. They're negative tax consequences for your shareholders in terms of attributing your unrealized income and things to them. So each of our shareholders, whether they sell the stock or not, would get a portion of our income or loss and have to declare that as taxable income. So it's pain. It's not something that we would want to put our shareholders through. And the challenge is once you're assessed to be a PFIC, you're forever a PFIC. So for us, it's important that we not be a PFIC. How do we avoid that? It's simply by doing what our core mission is, which is we aim to own and operate businesses in the insurance space. So control positions in operating businesses are key for us. At the moment, by virtue of positions such as Ark, such as Bamboo, these are assets that are out there and actually doing real operational business of which we have control. So we don't see ourselves at a risk of a PFIC right now given the portfolio. But if we were ever sold everything and we reinvested in all minority passive positions, that would be an issue for us. So it's something we're constantly monitoring to make sure that we don't fall into that bucket. I think we're in a safe position right now. But as undeployed capital grows over time or we realize sales of businesses, it's something that we monitor. Anything you want to add to that, Dave?

Is an exposure -- any potential PFIC classification is an exposure any non-U.S. financial services company faces. And I see that, that almost all of our competitors have a similar risk factor in their 10-Ks. And we work to monitor and make sure that, that does not happen.

So another question. In November 2021, in the New York Times, there was an article titled large insurers are hatching a plan to take down coal. The first sentence said, Thomas Buberl, CEO of AXA, wants to stop coal mines and plants. The question is, does White Mountains or its subsidiaries have a policy regarding the provision of insurance or reinsurance that would assist in the transition period from coal, oil and other carbon-based industries to more environmentally friendly energy sources.

Yes. It's a good question. The article references what's called the net 0 Insurance Alliance, which was led by Buberl, and was joined by, I don't know, 6 to 10 large insurance companies, mostly European. We are in order of magnitude or 2, too small to be invited. And they decided that they would pursue net 0 underwriting portfolios for themselves by the year 2050 and kind of implicitly they would get there by pulling on 2 levers. One was decreasing the availability of insurance for risks that were attached to carbon producers and, on the other hand, increasing the availability of insurance for alternative energy providers. So that was the game plan. I would note that -- I think that, that alliance has more or less disbanded with half or more of the parties stepping down without really achieving very much. That's neither here nor there because the question remains, what is White Mountains' attitude towards using insurance as a lever for accelerating energy transition. And before I answer the question specifically, I would say we have done a lot of work over the last 3 years on ESG matters in general, and I'd encourage you get to the website where this is laid out pretty clear. You get a sense of the comprehensive program of what we've got. But specifically on the question, here's where we land. In the investment portfolios that Jonathan runs, we do not invest in thermal coal companies. You'll see that -- how that's delineated on the website. In the underwriting businesses, we have made the decision not to exclude sectors written large as a matter of top-down policy. And we continue to underwrite our business on a policy-by-policy basis. We might choose to decline a piece of business for any number of reasons, including its carbon footprint, but we don't make -- we don't write off sectors because they are carbon energy producers. On the other hand, we have taken a number of steps to try to support alternative energy initiatives. And there's really 2, I would call out. One is the Green Star program at BAM. And this provides investors with a third-party assessment of the green attributes of municipal projects and issuance that they're coming to market. So to the extent that an issuer cares and wants to buy that debt or buy it at a tighter spread, they have some objective information to look to, to make that happen. And then second, Ark does has an initiative to support renewable energies and clients and as well as part of the Lloyd's overall initiative on this. So that's where we've landed on this question. And frankly, I think it's a pragmatic and pretty reasonable place to be for now.

Next question is, over the decades white Mountains has bought and sold many businesses. In contrast, Warren Buffett's favorite holding period is forever. With hindsight, are there any businesses that you sold that you wish you had kept?

Boy, it's a good question. There are businesses -- I mean, you second-guess everything. But I wouldn't have mind -- I would not have minded continuing to own OneBeacon or [ Essem ], frankly, today, all the [ whitehall ] we got fabulous prices in both cases. And I'd be torn if presented with those decisions again, which I was at the time.

Another question is you mentioned earlier that Giles Harrison will be coming on board next week. What is his mandate? And more generally, as you bring new folks on, how do you maintain the White Mountains culture?

Right. So let me take kind of -- get to the second part of the question first. I think it is hard for us to bring people in from the outside, especially at senior levels. We are a small idiosyncratic company at the parent company level for sure. But a couple of things to understand about Giles. First of all, we know him very well and vice versa. Giles was our banker on the OneBeacon IPO in 2007, and has done lots of projects with us over the years. We have deep respect for him, confidence in him. And on the flip side, he knows how we operate. And so in contrast to other situations where I think there might be a pretty steep learning curve around White Mountains' approach, there's just no learning curve. In terms of mandate, it's important to understand, Giles has enjoyed a broad and deep career in insurance. He's done deal making, he is an investment banker, he's done deal making as a principal investor. He's been the CFO. He's had general management experience. So he's capable of making place all over the field, and that's what we're going to expect him to do. The other thing I would touch on is, we brought him in as Chief Strategy Officer, and I just want everybody to know that that's a made-up title and we all sort of chuckle because Jack used to say we have a strategy of not having a strategy. So we thought why not have a non-strategy officer. In terms of initial assignments, Giles has gone on the board at BAM, where I think we will all benefit from some fresh perspective and insight. Given his extensive experience in California, I think you will lean in at Bamboo for sure. And given his experience in public markets, I think he'll help us with the MediaAlpha position over time as we think through what to do there. But -- and I expect they'll be involved in new deal generation because he comes from that world. So I think lots of different places for Giles to contribute.

Trying to parse this question. In the past, White Mountains has owned a lot of balance sheet businesses. Today, a number of our businesses are either MGAs or totally different businesses like MediaAlpha. Does that expose the company to -- more to drops in pricing than being an underwriter of balance sheet businesses do? And if that's the case, will prices be high, long enough to earn decent returns on these types of businesses?

One way I would answer that question is, in my years here, it's grass is always greener situation. All the guys who run MGAs want to own balance sheets, have no concept what it means. And all the guys who want to -- who run balance sheets want to get rid of them and be a fee business. And I think from a White Mountains perspective, we're just pretty agnostic. We want good teams, running good businesses and we acquire at fair prices and then do something with. I don't think these businesses are more or less insulated to trends in our marketplace in general, 1 from the other. I think this is about underwriting a specific investment and getting it right. Anything you want to add to that?

Just I'd say, I do think 1 of our differentiator, I mean, if you look at who we compete against for deployments, it's off to middle-market private equity firms. I think our history of owning balance sheet businesses and distribution businesses and our comfort on the balance sheet side sets us apart because there are many financial sponsors who don't want anything to do with the balance sheet, which is, I think partly why you've seen the run-up in pricing on brokers and some of the folks that don't have balance sheet exposure. So I think our ability to tackle both sides are comfort with that, our ability to do hybrids like what we've done with Outrigger putting or Bamboo being able to put capital behind that if the opportunity presents, I think, sets us apart from many private equity sponsors. And I think that's attractive for companies that understand that there is a gray area here, and there are more hybrid structures and our comfort and speed and ability to deal with that sets us apart.

Two more questions. One relates to Ark. The question is that Berkshire just had a large payout on wildfire damages. And the question is, what sort of exposure does Ark have to wildfire risk, particularly driven by utilities?

Man at the moment here. Ian, there's a question about your book. Yes. And what kind of -- yes. Can you roughly quantify our exposure to wildfire risk in California and in particular, attached to utilities.

Roughly quantified. We disclose anything in the case?

No. Okay. Not specific to that.

The exposure actually comes from a slightly odd angle. So generally speaking, we have 3 levels of exposure through. Broadly speaking in property, we have 3 levels of exposure through our D&F book, so property insurance where it's sort of, I'll call it minimal, it just really isn't born. There's obviously in the property treaty book, you will always get exposure. What the genuine exposure is, it's quite hard to model, As we've discussed or other people have discussed. But we're not hugely worried about that. If you look at our losses in 2017 and 2018, you wouldn't actually notice them in those losses in terms of our overall combined ratios. So in 2017, when we had wildfires and we had Harvey, Irma and Maria, we outperformed the Lloyd's market average by, I think, 20 points. So we are like low 90s. So we're just not too concerned about that. And so in the property book, actually, the strange thing is that, we're not hugely worried about it. The entity of our book is actually, we pick up wildfire exposure through our excess casualty insurance book, which is based in Bermuda, which is a Fortune 1000 style company. And we have a handful of small limits and they're typically $1 million, $2 million, $3 million, $4 million, $5 million limits for vegetation clearance companies for the utilities. So we're not a massive fan of inverse combination of strict liability, which is effectively what you get in California. So if we had a cold day now, you'd probably expect something between us over a $25 million thereabouts of loss, so well within our loss loads, but it's more from casualty than CAT, if you will, in secret barrels. That will be poisoned words now on picking up from someone I didn't expect.

Another way to come at it is, if you look at the PMLs estimated losses for large perils, which we do disclose, wildfire don't make the list.

Then the last online question. I think the question is hoping that you'll -- let out your inner jack burn here, although I don't even think Jack answered this question. What do you think White Mountains intrinsic value is relative to its stock market price?

Yes, we don't answer that question. You just have to infer from our actions.

I'd like to just ask a follow-up on excess capital. So the $600 million that you cite that is at the corporate...

I can go back to the slide at the beginning.

That's at the parent level. Now is there any excess capital at the subsidiaries is Ark have excess capital, Kudu. We've -- the approach we've taken with Ark, which I think is the right approach, if it's excess, give it to me. But in general, is there like -- is there excess capital at any of your subsidiaries?

No. I mean, obviously, Ark has to manage its own rate at the rating with best as the -- is the de facto constraint on capitalization, and we operate with a margin over what we think we need to carry. But I don't view that as excess in the context of the question you're asking.

And just maybe on that, have you disclosed how much you've been dividend from Ark over time, if any?

We haven't given any...

You have not.

And we have done work excess capital, we can use our capital to now.

So if you don't mind me putting on the spot, how do you get paid? You have a meaningful equity ownership? How do you personally get paid? How do you think -- I mean you have a lot of your net worth presumably in Ark, and it's a...

I got a big chunk of change in Ark. So I get paid salary, bonus like everybody else, and then I've got my chunk of Ark. So I get my 3% of my devise, they did personally a rather kept it and rolled it up, but they told me capital has to eat and I said, well, you don't get hungry, but then I lost because I tend to lose.

And just to clarify, as Manning described, what we try to do is have each of our operating companies pay 3% annual dividend. Ark has paid a 3% annual dividend to shareholders, which includes Ian and ourselves over the past few years.

That's not because I wanted to, right?

But above the 3% dividend, no other return of capital.

Are there other compound in the 20s, then leak it out.

Thank you for that, Ian.

If you're with me on this one, that's going up on them.

Yes. I disagree with that policy.

It's my chance.

All right. Any other questions? Is that it from the Internet? And any other questions from the crowd? All right. Well, we will call this meeting closed and see you next year. Thanks, everybody, for being here.