American Coastal Insurance Corporation (ACIC) Q4 2014 Earnings Report, Transcript and Summary

Greetings and welcome to the United Insurance Fourth Quarter Financial Results Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. I would now like to turn the conference over to your host, Mr. Adam Prior of The Equity Group. Please go ahead Sir.

Thank you, operator, good morning everyone and thank you for joining us. You can find copies of UPC’s earnings release today at www.upcinsurance.com in the Investor Relations section. You’re also welcome to contact our office at 212-836-9606 and we would be happy to send you a copy. In addition, UPC Insurance has made this broadcast available on its website. Before we get started, I would like to read the following statement on behalf of the company, except with respect to historical information statements made in this conference call constitute forward-looking statements within the meaning of the Federal Securities Laws including statements related to trends and the company’s operations and financial results and the business and the products of the company and subsidiaries. UPC’s actual results may differ materially from the results anticipated in those forward-looking statements as a result of risks and uncertainties including those described from time-to-time in UPC’s filings with the U.S. Securities and Exchange Commission. UPC specifically disclaims any obligation to update or revise any forward-looking statements whether as a result of the new information, future developments or otherwise. With that, I’d now like to turn the call over to Mr. John Forney, UPC’s Chief Executive Officer; please go ahead John.

Thank you, Adam, and good morning to everyone participating in the call. This is John Forney, President and CEO of UPC Insurance and with me today is Brad Martz, Chief Financial Officer. On behalf of everyone at UPC Insurance I want to thank you all for your interest in our company. Brad and I look forward to answering any questions you may have at the completion of our remarks. Yesterday we reported the results of an excellent quarter and an even better year. We are humbled by the financial success we have achieved and I'm grateful to the associates of UPC Insurance and to all of our external partners, independent agents, investors, regulators, and reinsurers who have contributed to that success. The numbers are impressive from top to bottom and Brad will cover that in more detail, but they are not the true measure of the success we had in 2014 or the opportunity we have in the future. As I have stated repeatedly on these calls and in other forums, our goal is to create a geographically diversified insurance franchise that can endure for generations. We want to have a company that can not only survive but thrive when the wind blows and when it doesn't, when markets are soft and when markets are hard, when reinsurance capital is scarce and when it's painful. In 2014 we took meaningful steps towards building that franchise. Here are just a few highlights; we gained licenses in seven additional states and two more subsequent for the end of the year bringing the total number of states in which we are licensed to 18. We launched UPC Insurance [indiscernible] core non-GAAP underwriting print, sophisticated cap pricing algorithms. We will roll this product out in all our states in the coming months and are confident that it will not only further distinct brand identity or provide us a competitive advantage in many territories. We've began the process to bring in house certain underwriting, customer service and administrative functions that have historically been outsourced, and consumption with the coming March of a new and dramatically improved finance system for agents, these gaps will further our ability to positively influence the agent and policyholder experience and therefore build our brand. We hired three new members of our existing team including Chief Underwriting Officer, Judy Copechal; and General Counsel, Kim Salmon; thereby completing the assembly of an eight member executive team that I believe is the most comprehensive and best by far amongst our peer group. We launched our commercial residential product which is also a great start in Florida and which we plan to rollout under stage in 2015. We initiated and subsequently completed the purchase of family security holdings, and a subsidiary bringing us a new group of talented associates, an excellent book of business in Louisiana, and a Hawaii-domiciled insurance company that provides us additional market access and strategic value in the future. We completed an equity offering and later filed the shelf registration statement that will help ensure we can access capital markets prudently and efficiently to support our growth. We focused on innovative reinsurance program providing over $1 billion in coverage that protects us against the repeat of any historical storm that infused the United States since 1900 and more. And we filed and received approval for a strategic repositioning of our rates and product features in Florida designed to promote continued and diversified growth in our home state. All of these steps are meant to ensure the fulfilment of our value proposition to our customers. The natural stability, products that work, superior claim service, ease of doing business and fair pricing; we have invested a lot to make all this happen and that wraps the best news of all, we have achieved great financial results while investing heavily for our diversified future with a long growth trajectory. That's why I'm confident that our best days are ahead of us and while we look forward to the journey. At this point I'd like to turn the call over to Brad Martz for more detail discussion of our financial results. Brad?

Thank you John, and good morning, this is Brad Martz, CFO of UPC Insurance. Before we get to the financial highlights, I would also like to encourage everyone to review our press release and Form 10-K that we plan to file Tuesday, February 24. The highlights of UPC’s fourth quarter includes net income of $11.4 million, a 55% increase from the fourth quarter of 2013, a terrific combined ratio of 81.6% comparing favorably 82.7% last year. Book value per share increasing to $9.75 per share, up 47% from prior year end, return on average equity of 27.2%, six plus point improvement year-over-year continued favorable reserve development and solid organic growth in direct written premiums. Drilling down on UPC’s revenue production, you will find total revenues grew 20% from $53.4 million last year to $76.2 this quarter. Gross written premiums were approximately $114 million, with $92.1 million direct written and $21.6 million as assumed written for citizens property insurance corporation in Florida. Of the $92.1 million in direct written premiums, they increased 17.2% from the same quarter a year ago or it was 65% of the total and all of your stage grew to 35% of our business mix. For the quarter all of our direct written premium growth was outside of Florida but for the year Florida accounted for approximately 27% of our year-over-year growth and the second phase output for it was impressive 73% of the $78 million year-over-year increase. Our team has worked extremely hard to build out our platform for growth, and more truly UPC has now proved it right in 18 states. While the 10 new states in which we have not yet begun pricing represent tremendous opportunity. We will not lose faith but fully using all those opportunities in each and every state. Switching gears, UPC’s loss results; a loss transfer made monthly favorable was our frequency and severity improving slightly during the fourth quarter. This year it compared to prior year and the prior quarter. For the tenth quarter adverse loss in ratio in LE ratio improved to 29.2% versus 32.4% a three point decline. Our underlying growth in gross in LAE ratio also improved slightly to 30.6%. For those in our prior year loss reserves, it's favorable for the quarter and management remains comfortable with all of the carried liabilities in all less than a year. UPC’s AOP loss ratios outside of Florida continues to meet or exceed our expectations and off states are currently performing within our level of pricing targets. This is good evidence that we are growing responsibly in every market and mostly avoiding plight of any adverse selection. Net reinsurance or loss in underlying loss ratios all showed improvement for the quarter and the year. On the expense side, our company’s total non-loss operating expense increased approximately $6.7 million or 33% year-over-year. The gross expense ratio increased three points per quarter to 25%, was driven by higher acquisition costs outside of Florida, and continued investments and fee for infrastructure required in source, significant systems and services capabilities. Also worth mentioning is that for the year our net expense ratio actually declined one point due to lower reinsurance cost. So we are carefully managing the build out for our future operating model within our parameters. Our balance sheet remains solid as UPC ended the quarter with just under $204 million of shareholders equity, lower financial leverage and a net unrealized gain on the investment portfolio. Our liquidity remains strong with cash and investment holdings increasing $116 million or 36% over the prior year end at roughly $443 million. Statutory surplus of UPC was approximately $126.2 million. With that I'd now like to reintroduce John Forney for any closing remarks.

Thank you, Brad. Once again I'd like to thank everybody for your participation and your time today. At this point, we would like to open the call up for any questions that you may have.

Thank you. [Operator Instructions] Our first question comes from Arash Soleimani with KBW. Please proceed with your questions.

Hi, good morning.

Good morning.

Good morning.

I had a couple of questions here; can you talk about what you're seeing in Massachusetts and Rhode Islands in terms of weather losses so far this year?

Sure. This year the northeast is experiencing another heavy winter, not unlike 2014 and 2013 where we had the company experience similar beyond experience. I don't think the activity in 2015 is unusual given the prior two years, it's expected at price for [ph] and to further bolster our defense against winter performed losses on January 1 we accepted a new underlying catastrophe reinsurance tree that provides us $22 million of coverage in excess of $3 million. So for large catalogs are underneath our $25 million catastrophe programs retention, we now transfer in excess risk of about $3 million.

Okay, great. And in terms of severity would you say I guess the weather events in the northeast are - did you say they are pretty similar in severity to last year 2013 when you had storm such as Nemo?

Absolutely.

Okay. And would you say those are sort of contemplated within the current pricing you have in place, do you think the pricing you have in those states - you feel comfortable of that - it takes these types of events into account?

Yes, it does. It's all part of our expected loss in allowable pricing.

Okay. And also can you talk about where the favorable development came from this quarter?

Mainly on the accident years, 2012 and 2013, the majority of it was 2013, those are the two accident years where our conservatism may have done real heavy handed as we sort to implement a different reserving philosophy, we've talked about that at length in prior calls but the claims department has done a terrific job managing our claims and we feel very good about the reserve practices, we haven't made any significant changes, we're not overreacting to the favorable reserve development, we saw this in 2014 calendar year, one year doesn't make a trend but we feel good about our practices.

Okay, great. And the other question I had and I know part of the year-over-year difference on gross and premiums in Florida is impacted by some premiums. But I guess my question there, it looks like if you take some premiums into account Florida grows premiums that climbed by about 9%, and I guess my question is if that's part of - like a strategic initiative to sort of get rid of underperforming policies or is that sort of just lumpiness in terms of written premiums, I don't understand that [ph]?

Arash, this is John Forney, I'll take that question. If you look at the quarter and take out the assumed premium, that explains 80% of the declines in the forward premium, we just did a smaller takeout in the fourth quarter than we did a year ago, as you know take outs are not a core part of our gross strategy, we do them opportunistically and very selectively and we found the selections not to be as attractive this time as they had been previously, so we did a smaller takeout and that's 80% of the difference. The other small percentage decline is due to two factors; one, increased competition in the Florida market with a lot of folks competing for business and pricing stuff very aggressively; and our desire to reposition our book in Florida to diversify to part of the state where we have not had historically a big presence. I think if you take the length back and look at the bigger picture, we grew in Florida on a direct basis, even not taking into account assumed premium we grew by about 7.5% in 2014 on a base of almost $300 million. So that's good steady growth except that our low end of the guidance we had given somewhere between 5% and 15% organic growth in Florida, but again that we're happy with that given the very competitive nature of the Florida market and given our desired reposition our book which required us to file new rates and product features to enable us to grow in parts of the state where we had before doesn't want to affect you anywhere first, we expect to see the fruits of that this year.

Thanks. And which part of the states are you trying or you want to increase your exposure to?

Broadly speaking, if you look at state in five seconds, more or less by Interstate 4, and the disproportionate portion of our book has been south of Interstate 4 and we're looking to diversify that - north of Interstate 4, now most of the people in Florida live south of I-4 so if you're following the population you are going to have most of your business south of I-4 but nonetheless, we needed to get some additional exposure in the north probably defining that's what we're trying to do.

Thanks. And just to touch on your comment on increased competition in Florida, I mean what's your expectation for overall pricing in the state; I mean is it kind of mid-single digits down or you think it could even hit more like 10% down type of scenario in the quarter, what are your sort of thoughts on the market?

On the big applications I can just tell you what we've seen in filings and that mid-single digit down has been fairly standard across the board for firms that have been filing for new rates including ourselves. So overall single digit declines has been representatively kind of filings that we've seen.

Okay, great. Thanks for the answers and congrats on the quarter.

Thank you very much Arash.

[Operator Instructions] Our next question comes from Samir Khare with Capital Returns Management. Please proceed with your question.

Hi, good morning guys, how are you?

Good morning.

Good morning, Samir.

I think you have said three take outs in the fourth quarter, I was wondering how many policies actually stuck with you from each of the take outs, and the average premium from each, I think two of them were commercial residential?

The other portion of the impact of the three take outs in the fourth quarter was just under $4 million, and obviously there are losses, essentially including IBNR closures [ph] that we carry, so it's not wholly accretive just based on the earned premium. So we took out 25,000 policies on November 18 from a personalized take out, December 31 there were 18,797 of those policies left.

Okay. And how about for the commercial residential take outs? I can move on to another question if you want.

Okay. So - the November commercial lines take out - we won 86 policies but only 51 of those were enforced at year end December with 52 policies. And November commercial lines is little over $2 million in premium and December commercial lines is about $1.4 million in premium.

Okay. And the 18,000 stuck with you from the home owners take out rather than the 25; does that match your expectations or familiar stick?

Yes, actually closer to 19,000 or 18,797 to be exact were still enforced at year end, about $34.2 million premium, and I think it does meet expectations. So we know the market is suffering from a little bit of takeout fatigue, agents are being compounded by multiple companies for assumption opportunities and I think it's consistent with prior years, maybe slightly worse on the opt out ratio but consistent by expectations.

Okay. And the - I guess the opt out rate that you guys experienced in Q4, is that - I think you guys have a Q1 or January take out, is that what you are seeing so far as well?

Correct, it will be about the same sizes, the December take out, roughly 50 policies, $1.3 million in premium. We're building that slowly and remember, the take outs are non-recurring transactions, it's the way we solve our growth strategy, it's not the foundation of what we've been.

Okay. And could you guys - I'm sorry, I may have missed this. Did you guys say how much you guys, how much cash has been - the whole go at this point?

Well, I mentioned we had cash - the cash on balance sheet in the holding company is right around $55 million, sure I have the correct one.

Okay. And is there a match net premium surplus we should be thinking about that you guys want to stay under before you put more cash in from the holding comp?

Sorry, could you repeat that?

Is there a maximum net premium to surplus that you guys kind of want to stay under before you've put more money into the insurance subsidiary from the holding company?

No, we don't have an automatic metric that we're looking at; there is a whole bunch of factors that go into our decision to how much cash to hold new company versus the insurance company.

Okay. And the initiative - the cover that you guys showed that you have for the northeast and you brought at 11, I think it was like excess of $3 million, what did you guys pay for that?

Its premium rate, so the final cost will be determined on how much premium is written in 2015 during the previous year.

Okay. And is that a fair bet or is that an aggregate cover?

It's an aggregate; it's got one free reinstatement, so its $22 million a limit with a contract limit of $44 million.

Got it. I'll re-queue, thank you.

[Operator Instructions] Our next question comes from Dan Farrell with Sterne Agee. Please proceed with your question.

Hi, good morning. A question on your extension in other states, I'm curious what your current view is on the potential abilities to do acquisitions or smaller book roles, do you see - I'm just trying to keep more business whether you still see ability to take out blocks of policies or deal few things about nature?

Hi Dan, this is John Forney, thank you for your question. We have over the last couple of years looked at lots of different possibilities for acquisition and companies or books. As you know we just completed the first one, an acquisition of Fan Maturity Holdings, it brought us a good type book of business in Louisiana as well as our second insurance company, Don Mathall [ph] in Hawaii, this is great strategic opportunities going forward. We see other opportunities out there, we've been exploring them but we want to be disciplined in what we're doing but certainly there are opportunities in that regard going forward.

Okay, thanks. And then just as you continue to expand just eight footprint, I was wondering if you could talk about how you approach managing sort of risk in different states, and maybe less on cap because you can use a lot of reinsurance to manage that but how do you sort of assess attritional loss and are there investments in people, technology, and things like that that you view just sort of understand as rest in then. Should we also think about the G&A ratio potentially, training sort of at this file or maybe having some huge investment as you try and put in things like that to plan for further build out. Thank you.

We take a very methodical approach when we are entering new states, we research the markets thoroughly, our product management department produces the results of that research, we hire people on the ground usually before we are even licensed, certainly before we arriving in business those people that we've been fortunate to hire in all of our states have spent their entire career in those states in either a marketing or underwriting or both, and so they have great experience in loss factors and with agent relationships and can help ensure that we're not maybe adversely selective against. We have customized underwriting standards for each state on age of home and type of constructions and various exclusions or inclusions depending upon the loss characteristics that are unique to each state and we try to be very careful about what we're doing, and so far that has worked out very well. As Brad noted, our loss experience in all of the states that we've gone into has been at/or below our expectations and that's a tribute I think to the careful preparation that we've done as we've entered these states. With regard to your question about G&A, there is certainly overtime we will have the benefits of scale and our G&A cost will be able to decrease as a percentage of premium that probably won’t be this year. As I noted in my remarks, we're investing heavily in technology and we are transitioning from a model which outsource certain functions, to one that is going to insource virtually all functions, there will be some redundancy while we make that transition because we want to do it very carefully so there is no disruptions to our agents and to our policyholders. This year you will see some of that redundancy show up in our G&A cost but overtime we expect to realize significant benefits of scale.

Okay.

And Dan, this is Brad further extending on that one moment, the recurring cost related to policy acquisition that are system related today or captured in policy acquisition costs, and they are variable, related to or to our policy account. Those are the costs that we seek to eliminate by increasing some of these G&A expenses, moving from a variable cost model to a fixed cost model. It is - you will start to see the policy acquisition cost come down not necessarily the other operating.

That's very helpful detail. Thank you very much guys.

Our next question comes from Casey Alexander with Gilford Securities. Please proceed with your question.

Hi, good morning.

Good morning, Casey.

Couple of questions, the slight decline year-over-year in reinsurance cost, and I know it's early been everybody here is in discussions with the reinsurers and there were no major storms last year. How do you see the reinsurance cost trend developing - going past the June date into late 2015, 2016?

Well we are in discussions with reinsurers and I don't know that we have a prediction about how the market will go, those are very favorable discussions, there is obviously lots of capital available. As you know the major reinsurance brokers; AONs, and Willis and others of the world have been predicting anywhere from 5% to 15% declines per unit of risk in reinsurance for the coming three year. We don't have any reason to question those predictions, I don't know if they will come true or not, we're just trying to make sure we put in place a reinsurance program that provides a sample protection. But clearly there is a lot of capital still available for reinsurance and we expect to put in place the cost effective and comprehensive program this year.

Great, that's very helpful. Secondly on the family security deal in Louisiana, was that competitive, whether other buyers competing for that or was that more of just a direct negotiation?

Failed security had a very valuable franchise in Louisiana and they certainly have other companies that had expressed an interest in purchasing them. The onus of family security for various reasons talked that we were their best strategic partner going forward and so decided to enter into negotiations with them and conclude the deal.

Okay, great. John thank you for taking my questions, I appreciate it.

Thanks Casey, good to hear your voice.

Our next question comes from Dan Harvey with Southeast Companies. Please proceed with your question.

I have a series of questions, and with the G&A cost, I was curious, when do you guys plan on moving into your new office and what is the status of the parking lot that's continuous with that piece of property?

Thank you, Dan, while for those of you not from St. Petersburg, that's specific question, we are moving into new headquarters here in downtown St. Petersburg that we purchased from AAA, used to be called the Triple A Plaza, now will be known as the UPC Plaza, and we are - we're just selecting construction management firms, we'll begin the permitting construction process to remodel the inside to suit our company, and we expect to move in in the fourth quarter of this year. There is service parking that we own at the building, there is also a surplus parking lot that we leased from the City of St. Petersburg that had 87 years remaining on the lease. And we have ample parking between the owned and that market we will lease from the city on a long term lease and that's the status as of now.

Alright, thanks. Switching up to the northeast, the property casualty business, we're writing them, we're tying them with some car insurance up there, how is that working and do you see United getting into the car insurance business?

Thank you, Dan. What Dan is referring to is the strategic partnership we have with Arbella, which is a large - mostly auto wager in New England, very well respected, third largest auto wager in the State of Massachusetts where we get mutual discounts on each other’s customers, and that's been a very successful partnership for us and for them, and it enable us to access the whole region community and to grow our book up there so we've been very happy with the way that's gone. We have zero plans to enter the car insurance business directly, period.

Thank you. The political climate in Florida with our new Mayor and McCarty up there, the Insurance Commissioner, how is that looking these days?

Typically I was really worried about Trever Chris getting elected and doing some cramp down on us again. We certainly think that the regulatory environment in Florida is fair and even handed, as it has been now for us some time, I think that Commissioner McCarty has done a terrific job, both in Florida and its work at the NAIC, and we enjoy a very positive relationship with the OIR in Florida.

Alright. And then my last question will be with the stock, do you see any - increase in dividends, do you see anything else coming up that way with a bigger increase or do you see it's going in there supporting our stock price with any buybacks?

We have said consistently that we want to have a company that has a consistent dividend that grows as the scale and earnings of the company growth. And that's why we increased the dividend by $0.01 a share per quarter; it's commenced with the growth of the company. We hope and expect to be able to continue that as our company continues to grow and the earnings of the company grow. We have no current plans to do share buybacks and we will evaluate the need or the advisability of anything like that in the future if it becomes advisable. Right now we have plenty of opportunities to invest our money in growing our business rather than reducing the capital that we have invested in the business.

I have a follow-up and my last question is, is there any chance to give that past equity market to bring to dilute the shares outstanding and bring in more capital?

Well, if we did tap the equity market, it wouldn’t be to dilute the shares outstanding, it would be because we have possible growth opportunities that would increase returns to investor’s overtime. We are very conscious of making sure we maintain good returns on equity and hopefully you see that in the results that we've achieved in last three years going from 16% to 20% to 27% return on equity, those are pretty eye-popping numbers I saw which we reported came out yesterday on the P&C industry in 2014 that pointed at 6% or 7% ROE industry-wide. So we're proud of those numbers that we have achieved, even on a risk-adjusted basis those numbers are going to be low to mid-teens, so very strong ROE and we're committed to maintain a capital structure that enables us to do that. With that said, we do have a shop registration outstanding and we'll evaluate capital raising opportunities when appropriate to make sure that we can support the growth of our company.

Thank you.

Thank you, Dan.

The next question is a follow-up question from Samir Khare with Capital Returns. Please proceed with your question.

Hi guys, thanks for the follow-up question. You guys - last year I think we're talking about progressing list where can be popped up with some details about your progress there and potential timing.

Sure, we're excited about the progress it has been made, as you know it was almost a year ago that Brad and I made a presentation at the board meeting and broke the subject of take our programs to them which was a new topic. And that presentation and that idea have set off a chain of events that have resulted in recommendations to the legislature to implement a formal take out program, they are meeting now in Texas, they only meet once every two years, the legislature, and we'll see what sort of legislature emerges that will sloganize [ph] a takeout program for TWIA. In the meantime, TWIA has implemented their own clearing house program which is fundamentally different than the citizens clearing house program but nonetheless, these qualified companies have opportunity to selectively take out policies under the clearing house framework from TWIA. We are - we have exchanged data with TWIA, we have analyzed it, we have a lot of policies that we've identified as potential opportunities under this clearing house, and we will be sending out letters to agents and policyholders this month identifying those policies and beginning that process. So we're very excited about and note that I'd be able to achieve good results here in the first half of this year.

Alright, great, and what's the far good side of that clearing house take out?

I don't want to say at this point, we've got a lot - we've got 200,000 plus policies in TWIA, we think there are lot of attractive policies, so it will be substantial.

Great, okay. And - just how much home owners premium are you guys now rating a week? And then you can tell us how much voluntary commercial residential you guys are doing in the first quarter?

Starting with commercial, we rose about 900,000 of premium in commercial in the month of January on long term basis excluding the assumption, and that was almost double our plan. So we've got a very robust pipeline of commercial residential opportunities and that continues to grow each and every period.

And for a large premium of voluntary home owners, what's there you guys are reading at there?

Its $30 million plus a month. There is - we're getting new renewals, we get over 300 new policies every single day throughout our distribution network.

Okay. And then any thoughts as to what new guys will start rating at Hawaii and New York?

Well New York, we just got our license yesterday, after a long process we're really pleased to do that. So we're working on rate filings, forms, and that will coming up in next few months. Hawaii, security had to prove rates and forms there, we're looking right now to see if we need to tweet those in anyway in order to launch, I think you can expect to see it launch the product in Hawaii towards the end of Q2 or beginning of Q3.

Great. And with respect to the reinsurance covers that you guys brought at 11, was there any additional covers that you guys brought or it was just those aggregate cover that you guys spoke off earlier?

There was a progress cover, we purchased from January $2 million excess of $1 million on a progress basis. So that replace the 500 next to 500 per risk coverage that we have purchased the previous two years and we didn't from the pricing on that renewal very attractive. So depending on little more against severity we're very comfortable with the increase in retention on the risk side.

Okay. And the $22 million excess $3 million, was that just for the northeast or is that for all ex-Florida?

All states, all parallels, it's Swiss Re [ph], so both Swiss Re and January represent two new direct reinsurance relationships were expired about three companies, three balance sheets, very comprehensive covers, the only thing that really excludes is tropical forms and hurricanes as designated by the National Hurricane Center.

Great. Thank you guys very much.

Thank you, Samir.

Our next question comes from Richard Wilson, a private investor. Please proceed with your question.

Hi, thanks for taking my question. I would like to ask about doing business in other states, and specifically Florida is typical regard of this Demotech state, does Demotech ratings - are they recognized widely in other states or does this limit or otherwise impact the business you can write in other states or the agencies you work with?

Thank you very much, this is John Forney, I'll take that question. Demotech ratings are widely recognized and have not inhibited our wealthy business in the new states in which we are licensed and writing. That should be clear by the amount of growth that we have been able to achieve in those other states. As we grow and expand, eventually we will want to have A.M. Best rating because certainly in other parts of those markets, especially more inland parts of the market, A.M. Best ratings are more widely recognized and do help expand your distribution channels but for now the Demotech ratings serve nearly well and have been more than adequate for us to write quality business in the new states in which we're participating.

Great, that's good to know. Thank you very much.

At this time there the no further questions in queue. I would to turn the call back over to management for closing comment.

Thank you very much. Well, a lot of good questions today, and we really appreciate the interest that indicates in UPC Insurance and what we're doing. I want to thank you all for your participation in the call. As always, Brad and I are here to answer any further questions or follow-ups that people have, and we look forward to 2015 and beyond. So thank you very much everybody for your participation today.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. And have a great day.