Trisura Group Ltd

TSX:TSU

Earnings Call Transcript 2022-Q1

[Operator]

Good morning. Welcome to Trisura Group Limited First Quarter 2022 Earnings Conference Call. On the call today are David Clare, Chief Executive Officer; and David Scotland, Chief Financial Officer. David Clare will begin by providing a business and strategic update followed by David Scotland, who will discuss financial results for the quarter and year. [Operator Instructions].

I'd like to remind participants that in today's comments, including in responding to questions and in discussing new initiatives related to financial and operating performance, forward-looking statements may be made including forward-looking statements within the meaning of applicable Canadian and U.S. securities law. These statements reflect predictions of future events and trends and do not relate to historic events. They are subject to known and unknown risks and future events and results may differ materially from such statements. For further information on these risks and their potential impacts, please see Trisura's filings with the securities regulators.

[Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions]. I'll now turn the call over to David Clare.

[David Clare, executive]

Thank you. Good morning, everyone, and welcome. Our business performed well through Q1 of 2021, growing premiums 55% and compared to Q1 of 2021 -- sorry, that was Q1 2022. We recorded our highest quarterly net income to date of $21 million, supporting a 19% return on equity despite continued investment in infrastructure. Our team continues to demonstrate momentum as we scale an increasingly diversified specialty insurance platform.

Results again were particularly strong in Canada, with 53% premium growth in the quarter, supported by profitable underwriting, an acceleration of growth in the U.S. drove premiums to a new quarterly record, increasing 52% over the first quarter of 2021. In Canada, the standout continues to be Risk Solution, where Fronting and warranty programs drove an 82% rate of growth in the quarter. It is striking to observe the growth in contribution to earnings from Risk Solutions with a 216% increase in NUI versus Q1 of 2021.

48% growth in Corporate Insurance was supported by expansion of programs and sustained momentum with distribution partners as well as a healthy but mitigating rate environment. Surety growth of 34% was strong as the business benefits from tailwinds in established lines and expansion of U.S. practice. Importantly, loss ratio in Canada of 16% improved sequentially, driven by strong experience in risk dilution. Combined ratio in the quarter was 79.5% compared to 65% in Q1 2021, a very strong result in the context of a comparable period that benefited from significant onetime items.

The Canadian platform maintained a strong 30% return on equity and grew net income 24% over the prior year. With the expansion of our U.S. style Fronting, our Canadian entity now generates attractive fee-based earnings to complement the heritage of profitable underwriting. We have made progress in our U.S. Surety platform, which contributed $2.5 million of premium in the quarter, following the addition of experienced team members in Stamford, Denver and Philadelphia.

We are excited by the potential of expanding our Surety line to a larger market with promising infrastructure tailwind. That being said, we continue to navigate regulatory licensing and expect the muted contribution from U.S. Surety in the near term.

U.S. Fronting grew premiums 52% over Q1 2021. Maturation of existing programs drove top line. U.S. Fronting generated $342 million in gross premiums written and $14 million in Fronting fees. We recorded $29 million of deferred fee income at the end of the quarter, indicative of future fees to be earned. Loss ratio in the quarter decreased as we benefit from diversification while Fronting operational ratio increased from a shift in mix of business as a larger share of net underwriting income was generated from business with a higher retention rate.

The market continued to drive opportunities to excess and surplus lines, although we wrote $34 million in admitted premium in the quarter. Similar to our Canadian platform, the U.S. business may exhibit seasonality, making sequential comparisons less relevant than when the business was in a startup mode, annual growth potential remains strong, and we view results on a 12-month basis.

The strength of our growth has catalyzed historic levels of hiring, though we admittedly face the same difficulties in hiring that many industries are facing today. An important focus through this expansion continues to be increasing operational leverage while maintaining appropriate resources to manage and underwrite the business.

Interest and dividend income increased 24% over Q1 of 2021, the result of a larger portfolio as we grow the insurance business. The substantial increase in interest rates year-to-date drove unrealized losses in our fixed income portfolios, though the impact was mitigated through a short duration posture and positive contribution from equity allocation. Although we never like to see a reduction in portfolio value, the market is presenting us with opportunities to deploy capital at yields not seen since 2018.

As a growing company, we are fortunate to have significant and consistent flow of capital to invest, enhanced by the maturation of our existing short-duration portfolio investments. Prevailing bond yields are accretive to current portfolio yield, meaning that we are improving our base of interest and dividend income on a risk-adjusted basis for years to come.

The hardening market in corporate lines in Canada and E&S lines in the U.S. continued in the quarter, although we see reduced pace of increase versus last year. The majority of our growth has been achieved through enhanced distribution relationships and new volume. And as such, we expect to navigate eventual rate normalization smoothly. Although excess and surplus markets remain strong, our admitted capabilities will be important going forward with the continued expansion of admitted lines, maturation of Canadian Fronting and launch of a U.S. Surety strategy, we have ample and attractive opportunities to grow.

Our platforms have become complementary sources of lead generation for one another. And as we gain market share in one geography, our presence and capabilities of companion offices provide opportunities to generate new business and service partners across the border. Increasingly diverse and fee-based earnings help reduce volatility and supports our access to capital.

As we execute on our priorities through 2022, environmental, social and governance considerations are front of mind, an important part of Trisura's development. We are focused on better communicating existing initiatives and believe we have taken a step in the right direction with enhanced ESG related disclosure in our management information circular. I'm excited to introduce Janice Madon, our newest Director to shareholders at our upcoming AGM, an important and skilled addition to our team.

We remain an insurance company in growth mode and most focused on the skills and practices that brought us to this point, concentration in business lines we know, conservative underwriting and detailed structuring. As we've acknowledged in the past, our business can experience volatility in severity claims, but importantly, an increasing proportion of our business is now derived from fee-based earnings sources.

With that, I'd like to turn it over to David Scotland for a detailed review of financial results.

[David Scotland, executive]

Thanks, David. I'll now provide a brief walk-through of some financial results for the quarter. Gross written premiums was $481 million for the quarter, which reflects growth of 55% over Q1 2021. Fee income, which is primarily related to Fronting fees from our U.S. operations grew by 32% in the quarter, reflecting growth of Fronting premium in the U.S. Net claims expense in the quarter was greater than the prior year, primarily as a result of growth in the business. We also experienced a claims recovery in Q1 2021 associated with our life annuity reserves, which have since been novated with reduced claims experience in that quarter.

Net commissions expense increased by 100% in the quarter, reflecting growth in the business in both the Canadian and U.S. operations as well as a shift in business mix towards certain lines of higher commissions. Operating expense in the quarter grew by 24% over Q1 2021, reflecting growth in both the Canadian and U.S. operations. Underwriting income in Canada for Q1 was approximately the same as the prior year as a result of growth in the business and mitigated by an exceptionally low combined ratio in Q1 of the prior year.

Net underwriting income for the U.S. in Q1 2022 was greater than Q1 2021, largely as a result of growth in new and existing programs. In Q1 2022, the combined ratio in Canada was 79.5% and the Fronting operational in the U.S. was 75%. With the novation of the life annuity reserves in Q4 2021, we are now able to calculate a meaningful combined ratio on a consolidated basis. In Q1 2022, that combined ratio of the company was 72%.

Net investment income was greater in Q1 2022 then Q1 2021, as a result of an increase in interest and dividend income. The increase is primarily related to an increase in the size of the investment portfolio associated with growth in operations and contributions to capital from the debt offering in June of 2021. Net investment income in Q1 2021 was in a loss position as a result of movement in that quarter in the investment supporting the life annuity reserves, which was offset by the corresponding movement in claims expense in that quarter.

Net gains were in a loss position of $500,000 in the quarter, which was less than Q1 2021, largely as a result of movement in derivatives used to hedge share-based compensation. Income tax expense increased in Q1 2022 compared with Q1 2021, reflecting higher net income before tax in the quarter and a similar effective tax rate.

Net income for the group was $21 million in the quarter, which was greater than Q1 2021 as a result of growth in the business. Diluted EPS was $0.50 a share in Q1 2022, which was greater than Q1 2021. Consolidated ROE on a rolling 12-month basis was 19% at the end of Q1 2022, which was greater than the rolling 12 months -- at the rolling 12-month ROE at the end of Q1 2021.

Assets in the year-to-date period grew by $11 million. Cash in the quarter decreased as a result of a large number of payments in the quarter as well as deployment of cash to the investment portfolio. Investments have decreased, reflecting the transfer of assets from the novation in 2021 as well as unrealized losses incurred in the period. Recoverable from reinsurers have increased primarily as a result of growth in the U.S. Fronting business, where claims liabilities are largely offset by expected recoveries from the reinsurers to whom we see the business.

Liabilities in the year-to-date period grew by $13 million, primarily as a result of growth in unearned premium and unpaid claims and loss adjustment expenses, which have grown as a result of growth in both Canada and the U.S. As discussed, growth in these balances is largely offset by growth in reinsurance recoverables. This was also offset by a reduction in accounts payable accrued and other liabilities as a result of the settlement of assets from innovation in 2021 as well as a large number of payments in the quarter.

Equity is approximately the same at year-end, reflecting growth in net income, offset by a reduction in other comprehensive income. Other comprehensive income decreased in 2022, primarily as a result of unrealized losses on the bond portfolio due to rising interest rates. Book value per share was $8.66 at March 31, 2022, and is greater than March 31, 2021, as a result of profit generated year-to-date and mitigated by the unrealized losses on the investment portfolio in the quarter.

As of March 31, 2022, debt to capital was 17.4%, which increased after last year's debt offering but remains below our long-term target of 20%. The company remains well capitalized, and we expect to have sufficient capital to meet our regulatory capital requirements.

David, I'll now turn things back over to you.

[David Clare, executive]

Thanks very much. Operator, we'll now take questions from the line.

[Operator]

[Operator Instructions] our first question comes from Jaeme Gloyn with National Bank.

[Jaeme Gloyn, analyst]

I guess the first question will start on the U.S. fronting side, as I'm looking at growth in this quarter, pretty exceptional growth. And I know we used to sort of think about like maybe $10 million, $20 million quarter-over-quarter would be sort of typical growth. And we've had a pretty rapid growth here in the last few quarters. So maybe you could just sort of walk us through what's helping to drive that outsized growth? Is it more penetration and understanding of the programs with the MGAs? Is it hard market conditions and rising rates? What do you think is helping to drive that really solid growth and the sustainability of it?

[David Clare, executive]

Jim, thanks for the question. I would say it's a combination of those factors. We continue to see relatively strong tailwinds in excess and surplus lines in the U.S., which is where the majority of our premiums come from in our U.S. Fronting practice. That in combination with the maturing programs from MGAs that we've been working with for a long time, has driven a relatively healthy pace of growth, especially in Q4 and Q1 in the U.S. funding business. We tend to look at this business on an annual basis. And so any one quarter, sequentially, those comparisons now that we've got a much more mature business tend to be less useful. But I would say that the momentum that we've seen to start the year certainly gets us excited about the business.

[Jaeme Gloyn, analyst]

Okay. And still thinking about growth here. The net -- we added one net new program in the quarter. Could you give us a little bit of color around, is there a pipeline on net new programs? And maybe a little detail on the MGA market in the U.S. in particular.

[David Clare, executive]

Yes. So we continue to see a pretty healthy pipeline of opportunities coming into the business. That's included a number of opportunities that are currently sort of going through our onboarding and risk committee process. So I think the pipeline for us in the U.S. continues to be quite strong and has been strong to start the year. The net 1 new program again reflects a more mature business balance. So we've seen some programs that weren't producing sort of a critical level of volume, be rolled off as well as sort of a net addition of new programs in the quarter. So that nuance is very similar to what we saw in Q4.

The MGA market in the U.S. continues to be a pretty rapidly growing space, and that's been benefiting our business as a Fronting participant. MGAs in the U.S. and specifically those who participate in the excess and surplus line space have been one of the faster growing components of the U.S. insurance market, and we certainly expect that secular trend to continue. That's been a market that over the last few years has outgrown the pace of the traditional insurance market and certainly has benefited our platform.

[Jaeme Gloyn, analyst]

Okay. Great. And last one for me on the U.S. side. The Fronting operational ratio coming in at around 75%, Nice to see the loss ratio turning back into the mid-60s as well. Is this the right level to think about for loss ratios and expenses and I guess, that overall Fronting operational ratio as we go forward here for the next several quarters? Or are there other factors we ought to be thinking about in terms of that level?

[David Clare, executive]

Yes. In the near term, that's going to be close on our Fronting operational ratio. We continue to make investments in the business. So you've seen a bit of expenses going through the Fronting operational ratio as well as a bit higher proportion of our net underwriting income being tied to programs with a higher retention, which on a net basis increase the Fronting operational ratio.

Your loss ratio should be between 66% and 68% in the U.S., excluding any experience in catastrophe or weather-related losses. So that's the one thing to think about in quarters like Q3 or Q4, where you tend to have a bit higher experience in those lines. But generally, Jaeme, you're right, the levels you're seeing right now should be a pretty good approximation of what we've got in the near term.

[Operator]

Our next question comes from Marcel Mclean with TD Securities.

[Marcel Mclean, analyst]

I just want to start with a higher-level question. The hard market have been around now for sort of getting on 2-plus years, and that's certainly disproportionately benefited those E&S lines as you were mentioning. What's sort of your confidence in the hard markets persisting for, say, the remainder of 2022? And what sort of visibility do you have in terms of like are you seeing any signs of slowing down? Because certainly from our perspective, given the growth this quarter doesn't appear to be so.

[David Clare, executive]

Yes. It's a difficult question to be precise on Marcel. I would say we've continued to see strong trends in the E&S market in the U.S. We've seen some mitigation of those at least rate increases in our Canadian specialty lines and the Corporate Insurance practice. But given the uncertainty persistent in the market around things like inflation and loss cost trends, a lot of the expectations around that hard market are uncertain at this stage.

I would say our business model has been able to thrive in both hard and soft markets. And so for us, we've certainly planned the business for this year anyways, to not rely on a continuation of that landscape. We would certainly have visibility at least in the next couple of quarters of the current state of the market continuing. But I think that trend generally is mitigating versus what we saw last year.

[Marcel Mclean, analyst]

Okay. And then secondly, kind of related to that, the growth rates really across all of your lines of business this quarter, you referenced in the past what you consider long-term sustainable growth rates for each of those individual lines. And 2021 exceeded those levels by quite an amount -- quite a large amount. This year, my understanding is you thought that those might sort of trend down towards those longer-term averages. But given this strong performance in Q1, are you rethinking those yet? Or is it sort of too early in the year to say?

[David Clare, executive]

I think at this stage, it's too early for us to say. Certainly, we're very happy and excited about the growth that's been demonstrated year-to-date. Specifically, the U.S. really outperformed our expectations. But I think if you look at the Canadian platform, demonstrating 53% growth rate, over the prior quarter in Q1 of 2021, there's really substantial and significant growth there.

We continue to expect sort of the general growth rates that we talked about in Q4 for the full year. And I think it's important for people to model and view this business on an annual basis rather than just on any one quarter. We can probably revisit that question after the second quarter. But from our perspective, certainly, a very strong start to the year.

[Marcel Mclean, analyst]

Okay. That's good. And if I could just sneak in one more on the Canadian fronting operation. What's the landscape like there? Because you guys are one of the -- you're basically making the market here. You said that this market doesn't really exist yet and kind of testing the waters. What is the appetite like on the reinsurance side? Does it seem like endless appetite? Or are they sort of cautious right now in kind of giving you some to start with? Or what's sort of the runway here that you think this could grow into?

[David Clare, executive]

Yes. I want to be clear. There are other participants in the Fronting space. So we're certainly not the only people doing this in Canada. I would say that the style of our Fronting participation and certainly the novelty of the practice for Trisura has been significant and important for our business. To date, the [ asset ] or the reinsurers that we work with has been strong. So we are very excited about the programs that we have this year with our reinsurers. We continue to search for new opportunities to find other areas to work with those reinsurers as well as new reinsurers who want to access this market. But it is -- for us, anyway, is a tough business line and a tough model to forecast because it's a relatively new structure for Trisura in this market.

[Operator]

Our next question comes from Jeff Fenwick with Cormark Securities.

[Jeff Fenwick, analyst]

So David, I just wanted to start in Canada here, a nice bounce back in profitability at Surety this quarter. Just hoping you could give us a bit of an overview of the dynamics of the market. When you look at the performance in the quarter, the current period claims ratio crept up. It looked like it was near sort of the high levels over the last couple of years, and then that was offset by some pretty meaningful favorable development in prior years. So maybe just help us square what you're seeing in the market today versus that ability to be releasing reserves.

[David Clare, executive]

Yes, it's a great question, Jeff. It's important to note that there can be seasonality in the Surety loss ratio. And specifically, that seasonality rises in the first quarter of the year. Current accident year loss ratios tend to be high in Q1 as claims incurred in that period are generally not offset by reductions in IBNR, as IBNR for that accident year hasn't yet accumulated. So it's not uncommon for Q1 to experience a larger movement in prior year development.

Sometimes claims incurred in the previous quarters experience movement in the subsequent quarters. And in the case of Q4 or even Q3 this can span at year-end, which shifts segmentation of loss ratio between current and prior year development. So it's worth noting that this nuance can actually result in lower claims or lower estimates of claims driving higher loss ratios because of the segmentation at year-end between current and prior year. That sort of exacerbated by a posture of conservatism in IBNR at the start of the year. So in Q4, we had a larger dollar amount of claims than in Q1, but the impact of current year loss ratio was greater in Q1 given the timing of that reserve in process and the movement in IBNR.

So it's -- it should be noted that given the short tail nature of Surety and warranty businesses, frankly, the split between current year and prior year loss development is really less relevant than for longer tail lines. These metrics are more relevant for things like Corporate Insurance where claims development is longer. It also is probably worth repeating that our management team relies on the work of external actuaries to determine the timing and segmentation of these IBNR releases. So there's a real collaborative approach here with external advisers to set these amounts.

[Jeff Fenwick, analyst]

Great. That's very -- that's helpful color. So why don't we maybe ask one on the U.S. business then with the nice continuation of the growth that you're seeing on your business, on the Fronting business in the U.S. I can see the run rate of the premiums to capital looks like it's creeping up here again and maybe a bit above what you've historically targeted? And I believe that, that target level can grow as you move up those AM Best size ratings. But how are you feeling in terms of capitalization in the U.S.? And are we going to expect to see some capital fed down there to keep supporting the growth.

[David Clare, executive]

Yes, you're exactly right. So we usually tend to run our U.S. business between 5 and 6x premium capital. We've pierced at 6x level. Now I think for one of the first times, we'll likely look to inject a bit more capital into this entity. We've got that excess capital sitting up at the holding company. So we're fully expecting to fund that with internal resources, but the pace of growth in the U.S. continues to impress us and we're glad now to have some of those resources to funding that business available internally.

[Operator]

[Operator Instructions] Our next question comes from Stephen Boland with Raymond James.

[Stephen Boland, analyst]

Maybe just a little follow-up on the prior year development in Surety and Corporate. You mentioned that's a collaborative process of their external actuaries, but both very favorable this year. I just want to get a little bit more color is Surety and Corp, is that from the COVID years claims years? Or was that favorable development from older claims years? Maybe you could just give a little color on that.

[David Clare, executive]

Yes. So it's going to depend on the business line and the length of duration of those liabilities. Surety is a relatively short duration liability line. So most of the prior year development that you're seeing is as a result of strong performance in recent years, specifically 2021. Corporate Insurance will be a mix. So some of those are recent years 2021 and 2020 and a small amount from years before that.

[Stephen Boland, analyst]

Okay. And would that -- so you've depleted your conservative IBNR from most years, would we expect that favorable development to be ongoing at this level?

[David Clare, executive]

Yes. It's tough to predict, Stephen, but I would say our track record and our history certainly is one that's had relatively strong favorable reserve development over time. We continue to reserve at a relatively conservative level, given a little bit of the uncertainty that we see in the continued coven environment. So the growth that you're seeing in the new business that we're putting on is not coming with a lower or more aggressive reserving posture. We continue that same approach that we've had for the last few years. And so I would certainly hope and expect that our reserving practices and our results would look a lot like they've looked recently.

[Operator]

Our next question comes from Tom MacKinnon with BMO.

[Tom MacKinnon, analyst]

Just want to ask another question with respect to the Fronting operational ratio in the U.S. If we look in 2021, it was 73% or so in 2020, it was 71%. So the first quarter of 2022 being 74.7%, a little bit higher. I suspect that there may have been some higher commissions in the business that would have come into the Q1 2022 Fronting operational ratio. Is that a little bit more unique just to the business that was placed -- that you've just written? Or how should we be -- should we be thinking about maybe low 70s going forward for the U.S. Fronting operational ratio? And was there anything with respect to higher commissions that drove it up a little bit more in Q1 2022.

[David Clare, executive]

Tom, that's right. There is a mix of business impact to that Fronting operational ratio and part of that mix of business does include lines of business with a bit higher commission. So that does feed through to your Fronting operational ratio. I think that low 70s range in the long term is a good range to think about for that business. In the near term, in the next couple of quarters, you might see that a bit higher, closer to the low to mid-70s, but you're exactly right in the long term that low 70s is what we're targeting.

[Tom MacKinnon, analyst]

Okay. And then just if I look on Page 11 of the supplement, there's a bump up in corporate expenses and also a bump up in the share-based comp net of hedges. Not -- maybe you can just describe what happened in the quarter and how we should be thinking about those things going forward.

[David Clare, executive]

Yes. So a few things are happening in those lines. First and foremost, you'll notice that with the novation of our life insurance policy, we have removed disclosure around our segment of the international business. A portion of those expenses have been allocated to the U.S. business in support of writing reinsurance for that business, a portion of them have been allocated to corporate expenses. So there's a mix here of reallocation.

On share-based compensation specifically, you've obviously got a moving share price in the last quarter, and we've got a market-based hedge, which means any one quarter, you've got some movement around the edges on that hedge. In this quarter, there's an imperfect match in that hedge given some of the volatility in the market. But certainly, in the fullness of time, we anticipate that noise to mitigate.

[Tom MacKinnon, analyst]

And should we be thinking about the corporate expense run rate to be -- I mean not the share-based comp and of hedging, but the corporate expense run rate to be kind of in line with what we saw in the first quarter going forward?

[David Clare, executive]

Yes, I think you can probably use that as a good base. We'll update you at Q2 because sometimes Q1, there can be some one-off items in starting the year with licensing fees and regulatory fees. But I think that's a good starting point certainly for the year.

[Operator]

[Operator Instructions] Our next question comes from Jaeme Gloyn with National Bank.

[Jaeme Gloyn, analyst]

Just a couple of follow-ups. I wanted to get a little bit more detail on the Canadian Fronting partnerships, so -- on both sides of the equation. So first on the MGA side, is there anything you can share with us in terms of number of programs, what types of lines of business are being written and potential like, I guess, addressable market on the MGA perspective in Canada. And then on the other side, who are the reinsurance partners? Are they the same relationships you have on the U.S. side? Are there different players that are operating in Canada versus the U.S.? Could you give us a little bit more color on that?

[David Clare, executive]

Yes. We haven't talked in a lot of detail about the number and the types of programs that we have in the Canadian Fronting space. Yes. We haven't talked in a lot of detail about the number and the types of programs that we have in the Canadian Fronting space. I would say -- we've got a bit different focus, a bit different market in Canada than we do in the U.S. Fronting model. So some of these relationships are relationships with distribution partners beyond traditional MGA. So you've got a slightly different market here in Canada for that space.

The lines of business that we focus on generally are lines of business that we don't write on a primary basis. So we have to be very conscious of our market presence and channel conflict in that arena. From a reinsurance perspective, some of the partners that we work with are the same partners we work with in the U.S. Some of those partners are groups that we've worked with for a long time in Canada, generally, as a rule, the reinsurers that you're working with are reinsurers based outside of Canada and hoping to access Canadian premium.

[Jaeme Gloyn, analyst]

Okay. And as I'm looking at the Canadian Fronting business, last 12 months did about $230 million in gross premiums written, is that a comfortable level? I know it's still early days, but now that it's broken out, I'm certainly think about how to look at this on a multiyear basis in terms of the potential for the platform.

[David Clare, executive]

Yes. I would say our Fronting practice certainly had a very quick ramp in 60the last calendar year. We're thinking about that business is growing off a more stable base now. So I think that starting point is a good base to think about the new long-term average levels of growth.

[Jaeme Gloyn, analyst]

Okay. And maybe a bit higher level and some thoughts for the Canadian and the U.S. markets. So I'm just wondering if you have any observations around Lloyd's and their competitiveness. They -- a couple of years ago, they had some issues and exited some markets that perhaps maybe created some opportunities for companies like yourselves. I also was wondering if you had any refreshed observations on how they're behaving.

[David Clare, executive]

Yes, it's very interesting. You're right. The pullback in Lloyd's did catalyze or at least was an input into some of the factors that drove a hardening market in a lot of lines. We are seeing certainly a continued hard market in many of the areas that Lloyd's participates. And we haven't seen that reentry of new capacity yet from those types of participants. I would say that in the fullness of time, insurance tends to be a cyclical industry and tends to follow broad cycles without commenting specifically on where Lloyd's participates in that market, you would expect that in time, insurance markets as a rule will return to some normalized level of operation.

It's really tough to predict where exactly any one player will participate in this. And Lloyd's is a big participant. So it's always interesting to watch what they're doing. But that pullback that they started a few years ago. Certainly, we haven't seen a real reversal of that.

[Operator]

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to David Clare for any further remarks.

[David Clare, executive]

Thanks very much. Thanks, everyone, for joining. And if you have any further questions, don't hesitate to reach out to us directly.

[Operator]

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.