Lancashire Holdings Limited

Thank you. Good morning, everyone.

Thanks for dialing in. During the fourth quarter 2018, the insurance industry witnessed another series of cat events with Hurricane Michael making landfall in Florida and devastating wildfires in California.

These insured losses will mean that 2018 is an above average year for losses and 2018 and 2017 are the highest consecutive level of cat insured losses on record. Against this backdrop, I'm therefore delighted that the Lancashire Group has returned a profit for the 2018underwriting year with a 92.2% combined ratio and a 2.4% return on equity.

The events of 2018 provided another important test of our risk management. We have digested multiple large losses, those still generated and underwriting profit, and we have navigated volatile investor markets and still generated a positive return on investments.

We are growing our top-line premiums by 8% this year, but the real growth is closer to 20%, when we adjust for variables such as multiyear premiums, reinstatement and reinstatement premiums et cetera. This has been driven by positive rate increases across the majority of our product lines and the investments we might in 3 new underwriting teams during 2018.

We are seeing more new business done we have seen for a long time, some of which is adequately price now rates increases have been achieved, but we're still declining a large amount of new business that needs much more aggressive repricing before we are prepared to accept these risks. We have always said that we will adjust our underwriting according to the market conditions.

The momentum we're announcing is a clear indication of our view of the underwriting environments and that it has improves. But we are clear the off the years of rate reductions, there is still much work to be done to address underwriting profitability.

As the industry addresses the sins of the past. We believe that we will see a return to more sustainable returns with a balance of risk and return metrics will enable us to provide better returns for shareholders.

The momentum in our business leaves us perfectly positioned for the next stage of the underwriting cycle and we will look to maximize opportunities. Our strategy will always remain the same.

We will continue to demonstrate the underwriting and capital of discipline that we have had since the inception of our company. Finally, I would like to thank our shareholders for their support of our company and our people for all their commitment and dedication to our company.

On that I'll pass over to Paul Gregory.

Thanks, Alex. While 2018 has not seen the same loss quantum of natural catastrophes of 2017 it has been an above last year with natural catastrophe in numerous territories providing another testing year for underwriting portfolios.

In addition, there's been a high frequency of risk losses in many of the specialty insurance classes adding to the pressure to deliver underwriting profitability. With this in mind, I'm pleased with the 2018 combined ratio of 92.2%, which demonstrate the quality or in with underwriting and our reinsurance buying strategy.

2019, the first year for many years, where we're seeing positive right movement across the majority of our portfolio, albeit there was a clear difference in trends between catastrophe exposure insurance lines and specialty insurance. In general, the reinsurance lines saw better right movement at the start of 2018 with price rises less pronounced as the year progressed.

Whereas in the majority of especially line, the writing environment gradually improves as we progress through the year. Across our entire renewal portfolio, we saw rate increases of approximately 5% year-on-year.

In the specialty insurance lines that we expect to see continued incremental improvement in rates for 2019. Areas and the more significant rate rises are those lines that have seen capacity withdrawal, such as cargo, aviation and specific areas of the DNS market.

Other lines such as downstream energy and power also have seen rate rises for a number of years of poor underwriting performance and an increase in loss activity. This is all incrementally positive for us.

Specialty insurance lines are now approximately 2/3 of our underwriting. And we have a strong track record of producing underwriting profitability in these classes.

Even in the past five years where rights have been historically low, our combined ratio for specialty insurance has been in the low 80s. Therefore any positive movement in rate is good for us.

Last quarter we stated we expected a flattish proxy market for 2019, and that is effectively what we saw at 1/1, with some last three territories such as Europe seeing flat to low single-digit rate reductions and loss-impacted territories and account seen some rate increases. There was an element of dissertation in the retro market one with rate increasing and product offerings and structures changing.

This combined with catastrophe events in 2019 working our way through the system, may provide fresh impetus property cat rates as we move through '19 Albeit at this stage, our expectation remains for flattish pricing in property cat. Given the dislocation in the retro market, we were able to grow Kinesis at one for the second year NOI.

It was particularly pleased into secure additional support from Kinesis capital providers given the loss event for the past two years, as this support allows us to grow our footprint in an area of the market with same rate improvement. We've also grown our footprint in the specialty insurance arena, adding three new product lines during 2018.

Our timing of entry into downstream energy, power and aviation deductible has been opportune as we're entering these classes when the rating environment and each of these products is improvement. We will face the security aviation's deductible team in time for 2018 renewal season which is allowed to access business a year earlier than expected.

This premium accounts for a large proportion of new business in Q4. Overall our three new product lines contributed approximately $40 million in gross written premium in 2019.

Importantly, these product lines have lights capital requirements as a natural catastrophe footprint is relatively limited compared to other lines of business. As Alex mentioned, gross premiums have grown 8% year-on-year, the underlying growth is closer to 20% was multiyear premium and reinstatement premium impact has been created for.

The combination has an improved return environment and new business has delivered this growth. While we also, we're always very pleased to see right improvement and premium growth in our product lines as always we are fully cognizant of the base levels from which we are coming from.

So we will continue to maximize risk and return and focus on underwriting profitability and not just top line growth. We were in cautiously optimistic about 2019 given the improved rating outlook in specialty lines and the three new things being fully embedded within the business.

I'll now pass over to Elaine.

Thanks Paul. Following the third quarter's cats closed out 2018 with wildfires in California like last year developers isolation would notify the particularly significant impact of the group but in another well-above average year of losses, they added to the mounting tally.

The fourth quarter also included Hurricane Michael, which occurred in early October. Across the course of last event we've recorded a net loss after recoveries of $48.8 million.

The fourth quarter also experienced significant volatility in investment markets on our investment portfolio lost 0.1%. Our RoE for the quarter was, therefore, negative with an RoE of negative 1.4%.

However, with lower overall losses for the year remained profitable for the year positive, with an RoE of 2.4%. Our combined ratio for the year was 82.2% and our investment return was 0.8%.

While the RoE we produced has clearly been impacted by the run of losses over the course of the year, we remain pleased with the way our book performed across those events. We've produced an underwriting profit.

Our underwriting portfolio performed as expected, supported by our reinsurance program and also had a few nice reserve releases as some order claims finally concluded. On the investment side of business, our portfolio structure protected the downside as it's designed to do.

Also pleasing with the growth and the gross premium written in the quarter. While we saw some strong new business flow in the property and political risk book, the new underwriters and teams we've added to the business got off to a good start introducing over $40 million of new business to the group this year.

While it will take some time to build those books out and for the premiums to end through, there the meaningful impact on our top-line, particularly given that the fourth quarter is typically our lowest volume quarter. We also had some favorable reinstatement premium and prior underwriting year adjustments in the quarter, it's only a small offset for the impact of multiyear deals.

And as a reminder, the fourth quarter 2017 was negatively impacted by continued adjustments to prior year overdose or pro rata contracts due to the cancellation of some projects. Our premium CDs increased this quarter largely due to increased reinsurance on the new lines of business.

We do have a significant partnership arrangement on our new aviation deductible book. The net impact of all that is increased in net earned premium relative to the fourth quarter of last year, although lower percentage of earned-to-written given the higher relative volumes in the fourth quarter of this year.

Our acquisition cost ratio is high again this quarter. The fourth quarter of 2017 was somewhat artificially low given the adjustments made to prior underwriting year contracts.

The fourth quarter this year was also impacted by small of contracts in high brokerage and commission, which skewed the ratio. Our anticipated ratio turning back to around 27% next year.

As in previous years, we don't provide top-line guidance. However, we do expect to see the benefit of the new teams just hired in 2019, a continuation of the rate increases in our specialty lines, plus the new business opportunities across the rest of our book.

As ever, we'll have some impact from the timing of multiyear and non-annual plus non-renewing lines of business like the political risk book. In 2018, the net reduction and gross premium written for the multiyear and non-annual contracts is about $60 million and I would expect the impact in 2019 to be slightly lower than that.

On losses for Hurricane Michael and the individual wildfires are not significant. We've broken out the impact of the combined events in press release.

The net loss of $48.8 million contributed 45.5% to our loss ratio for the quarter. Offsetting those losses, we had net favorable prior year development for the quarter of $39.9 million.

We had a 2009 accident year energy claim settled in our favor, some favorable development in last year's cat events plus some general IBNR releases due to a lack of reported claims coming through. The succession of losses this year again book some losses under aggregate covers.

These are not individually significant, but I would characterize some as larger than pure attritional losses. However, we see there's slight uptick in the traditional and Cathedral books, our attrition appears to be running higher than we've been guiding.

When those are stripped out, we remain comfortable in the mid-30s for attrition. We may see that tick up a little bit next year though, as the new lines of business we're adding are a bit more attritional in nature.

As I mentioned, investments which is the 0.1% loss in the quarter, driven primarily by widening credit spreads and the sale of inequities impact on our risk assets. The fixed maturity portfolio performed well, though, and the overall portfolio structure mitigated the downside impact of the volatile quarter.

While we expect volatility to continue and further rate increases, we remain well positioned for both of those. We also have the benefit of reinvesting at higher rates, and we'll gradually increase the duration levels to get bonds of those higher rates.

No changes in our investment strategy for 2019. Our G&A ratio is reduced to due to reduction in variable compensation and consulting fees in the quarter.

And financing cost for the quarter increase slightly just the mark-to-market on our interest rate swap and also some NOC cost. Lastly on capital we're collaborative the level we're carrying, and we still have plenty of capital to underwrite this year, while maintaining our usual buffer for other opportunities that may arise.

The new you'd adding certainly not capital-intensive, so we don't need more capital great this. We declared our normal final order dividend of $0.10 per share or about $20 million and as ever, moving on to underwriting opportunities and adjust our capital accordingly.

With that I'll now hand over to operator for question.

Two questions for me. First one is, this new business obviously it's great news that business is coming back and you're seeing it could you maybe give us a real sense of where that business is coming back from as this kind of U.S.

domestic plays, et cetera? Where that's coming from?

And the second question, you're probably unlikely to give me an exact answer. But if we think about Q1 pricing, is it safe to say the Q1 RPI probably gets a bit of a bump from Marine numbers, given call of wasting of things that just to setting kind of color and that would be helpful.

Thank you.

So I think on the new business front I think, what happen in the market is as people are pulling out lines of business or just reassessing profitability. And just generally cutting back, we are seeing the business opportunity.

So, a real life example would be cargo. So like cargo saying we will see a lot of the business and some of that new business with adjusted rate increases or hit the metrics we need.

But there's still a lot of business that needs much more aggressive repricing. We are modestly sort of like confident about rates going in the right direction and that's great.

But we can't forget where we're coming from. So I think that what the industry needs and more everyone needs to do is just look at where rates are and some product lines need probably multiples of where they are or some individual risks need huge rate hikes to get to some of this adequate and other business is specified.

So, yes we are seeing the business the stone awful lot of work from here the metrics that we need but it is a clear indication that that things have changed and the issues a house concert to increase the profitability of the two very tough years.

Yes. Kamran, in Q1, there will be some loss impacted marine business.

So on the marine RPI that will obviously, come through the numbers, and you'll see that on next earnings call. As an overall comment though, at 1/1 across the portfolio, you've taken everything into account because obviously everything is premium-weighted.

You're kind of in the mid-single-digit rate rises across the whole portfolio. So that's kind of what we've seen in the moment obviously we've got some more Q1 business to go, but that's what we've seen at the moment.

And basically in line with commentary, you'll see in some of the specialty lines, same rate increases, reinsurance lines outside of retro are broadly flat, so that's kind of where you'll get in the balance. Also, I remember that in terms of the new lines of business, particularly power and aviation deductible, aviation deductible is really a Q1 issue.

Not all the business we want will come for the RPIs because it's new business. RPI is running basically a renewal business.

Two or three questions on my side. The first one would be on the P&L.

Looking at the changes your P&L exposures, could you explain what has driven the 2025 reduction in the U.S. and European hurricanes and windstorm risk for [indiscernible] return period and a bit more for, to 50 years.

And connecting to -- connected to that. Second question could be -- would be on the capitalization of the group.

So could you please update us on the Q1 capital position of Lancashire, at the end of the year on the S&P model, which remains your binding constraints thing that the S&P in its last report was pointing to the fact that you had a 10% redundancy over the AAA confidence level. So any update on that could be useful?

And this last question will be on the credit quality of the investment portfolio. It is slightly down from AA minus to A plus, so anything specific mentioned here?

Thank you.

So just one thing on P&L, so I just want to make very clear and then I'll hand up to Paul and then Elaine will clearly answer your questions is that, when P&Ls can move around at any time and probably explain why they've moved. But when we look at P&Ls and the way we think about P&Ls is one measure of how we look at business.

And we have pretty much, but exactly the same reinsurance program as we have done year-on-year. So there's not massive material change there, although the P&Ls have moved.

So the P&L for us, when we think about our business, it is one measure we look at and I just want to be clear on that. Paul, would you explain?

Yes. I mean, there are some movements as you say Thomas, and some of that relates to inward changes in the inward book at 1/1.

There were some areas where, there was some opportunity drive more business and others where we decided to write a little bit less than that's mainly driven by the rate environment that we saw there. As Alex said, reinsurance across the group is broadly the same, but there are some changes in some areas, which also kind of feed through to the P&L.

So there's a number of moving parts.

And on the capital side of things, S&P wouldn't be the primary measure. We look at a lot of different models and a lot of different measures are in capital.

AM Best is probably the one we pay the most attention to and generally we're thinking that capital, we look at where we are in the AM Best model strength and then some head and on top of that, and that generally means that the comfortable under the other models as well. So I wouldn't expect any material changes in the S&P model.

And then of course, for the investment portfolio Denise is here , so I'll let her take that one.

Essentially, there's not much difference, like there's a fine line between the Interviewee: minus and the A plus. We just liquidated more agency debt than treasuries for defense some of the payments.

We have going on in Q4 with the volatility that it chose to take, like take the quality security result. But it'll rebalance and probably jump back up to AA minus Q1, Q2.

Hi, thanks everyone for taking the questions. First, I just, I know you won't give sort of a proper guidance on premiums.

But I wonder if you could just help us a little bit think about the trajectory going forward, could you talk about this 20% underlying growth? Obviously, we have this dynamic to think about with the multiyear effects.

Can you just sort of give us a feel for what you think is realistic to expect over the next few years, given the teams that you've added? Presumably we should expect growth to continue but some sort of range would be helpful?

And secondly, a question on dividends please. For the last two years, your dividends have been, DPS has been higher than EPS.

And actually, I think if I go back to the last four or five years, that's been the case? And looking ahead, if the growth outlook changes, can you just give us a feel for what we should expect in terms of dividend?

Should we, I mean, I usually pencil in something close to 100% payout ratio. But if you start growing, is it too optimistic or just a feel for where we are on the dividend outlook?

It would be good. Thank you.

Alright, so I'm absolutely not going to give you any kind of range whatsoever so…

Well perhaps maybe if I just rephrase slightly than the 20% underlying growth that you talk about for the year, is there any reason why we should expect on an underlying basis that, not to continue going forward? Will the new teams that you've added, is it purely the reflection of adding those new teams?

Does that imply anything for the trajectory going forward?

We've had some growth on those teams this year. And there's also our kind of normal new business run rate, if you like, so we said we've got about a $40 million of premiums for the year, $40 million to $45 million for the new teams.

There's probably about 55-or-so that's just kind of our normal and run rate. Now those new teams have come on early.

We've got them and manage to get some premium in this year that people against the next year, so it will be an element of new business, but probably not the same kind of market as a team this year. Does that help.

Thank you.

And then the dividends, I'm not going to give you any guidance on that either.

But one point on that is it will always depend on what line of businesses we invest in because the lines that we have invested in 2019 as I said in my commentary are relatively capital-light. So you don't need additional capital particularly to underwrite these specialty insurance lines of business.

So it's always worth bearing that in mind. Obviously, if opportunities come up in capital heavy lines like retro or property cat, then that's a different story.

I have two questions please. One is on the attritional loss ratio.

Could you maybe describe the difference between the attritional loss ratio on the new business that have been put on the books relative to your sort of 35%, which is sort of your or mid 30s run rate. And the second question is I see that the Lancashire Holding has become group supervised by BMA on the 1st of January and now your tax resident in Bermuda.

Does that change anything at all?

So let me answer the first one. On the group supervision, Andreas, it doesn't actually change anything for us.

I mean, we are, we've always had a big presence in Bermuda and that continue. So it doesn't change anything really, I suppose, the Bermuda model fits the way we think about our business.

So it's probably easier for us to sort of translate, when you think about the way that regulator will look, Lancashire, it's just a bit more relevant the way we think our business. But there's no changes that would be obvious or necessary.

So it's pretty much business as usual.

And in terms of attritional loss rate, the new lines are a little bit more heavy in attrition. And if we've been going to kind of 34%, 35% before, then I would nudge off a little bit.

So maybe a little you're looking at something more or less 36%, 37% going forward.

And Andreas on that, every product line has a different profile. And some of the new lines that we've invested in are a bit more volatile and heavier on the client's experience.

So if we add new product lines, or the business mix changes, we'll always reassess where we're at. And in the same way that, if we were, there was an opportunity to write lots of more territory in business, and then obviously that would move our numbers around again.

So it just depends on the business mix of where we're at.

With that mix area, the follow-up, would that mean that your attritional, the volatility of your attritional claims is going to increase as well so -- particularly man-made losses?

I wouldn't see the volatility increasing. I think, it's just mean, to develop, hoping to see the volatility increasing.

I think it's just acknowledging that there is high attrition that comes through generally on those lines of business.

It was really just a point of clarification at this point, just to come back in terms of the growth that we can expect next year. I think, Elaine, you said that this $45 million coming from new teams.

I wonder how much of that was in 2018. And of the sort of the new business in Q4 that you had from those new teams, how much, if we go forward a year, how much would you expect that will sort of naturally be a growth just from the fact that there's sort of further bedded down when we're a year further out or maybe it's really just a clarity about where that $45 million splits between the 2 years that I haven't quite got a hold of.

Thanks.

Okay, Ben. So the $45 million was all in '18.

And if you take a look at the premium page and our supplement, and you can see the aviation deductible lines are out. There's a little bit of this underlying, little bit is done in Cathedral.

And you also see the onshore energy line of business under lines, which is a new stuff. And then within both marine and energy under Cathedral, there's new business coming through.

And there, too, also a little bit more in the aviation line of business. So we'd expect that business to most of a new and also top, a bit more new business on top of that, most definitely the aviation deductable line of business.

So Ben maybe think about it, we went into onshore energy at the start of the year. So we have had a full year on that class.

But we would expect to see some modest growth in that through the year before the writing environment has improved. And we were year-end so I really expect to see some new business.

Power, we started halfway through the year. Where we may so pretty much halfway through the year, so again, we would expect to see some modest growth in that as we have the first half of the year renewals to go through that is a smaller line of business.

We were able to get the aviation to that full time in for Q4 renewal season, which, as you know, is the big aviation renewal season. So we've picked up a lot of that growth a year early.

There should still be some growth on that class next year. But you wouldn't expect to see that until Q4 '19, which is a big renewal season for aviation.

Does that help?

Yes, it does absolutely. Could I just ask, just as a follow-on question on the aviation deductible, you mentioned a relatively big quota share on that book.

Could you just talk us through why you do that? Is it kind of just be very volatile?

How does it fit in to the use of the overall sense of risk, if you like?

Well, for every line of business, we obviously look that what's the most appropriate reinsurance structure. And for that class, we deemed the quota share option to be the most appropriate.

We were able to do that with some existing reinsurers that we have that know that team and know the Lancashire Group well. And that class business is just more suited to that type of arrangement is actually a new class of business for us as well.

So when we get around next year, we'll obviously review if it's still appropriate. But at the moment that that's the most appropriate reinsurance structure for that class.

Okay, thanks very much. Thanks.

Yes, hi from my side as well. The first question will be on dividends.

Basically you historically have been paying a special after Q3 mainly because you were quite expose to hurricane risk in the U.S. As the portfolio is changing, as you're buying quite a little for insurance right now, did you think there's any rationale around changing those specials into year-end.

And just double check knowing what you know today about the level of large losses that you have accrued in Q4, would you still have paid the dividend that you did last quarter? And then the other question would be on, since you have said that you have other new business there, can you give us an update on AUM or additional AUM for 2019?

Okay. Elaine, do you want to cover dividend?

Sure. And in terms of dividends that we paid last quarter and absolutely, we still paid.

When we look at other, the thing about the dividends is about the capital that we need to underwrite the portfolio, a buffer on there for any other opportunities and then kind of what's left or not. So we had capital in excess the dividend that we paid out, and we're more than comfortable with that.

And in terms of timing, I think timing of dividend -- special dividends is always going to be dictated by outlook. If we think that we can better underwrite the opportunity at 1/1, then we would do a special.

If we think that we have a really clear outlook, then maybe we stick with the normal timing.

There is some down from Kinesis. So, regarding the AUM our colleagues at Lancashire will never give you guidance because AUM base’s gone up 20% year-on-year.

Couple of questions from me. Just in terms of your gross premium written split going forward.

Now that you've added these new teams on. Is there going to be any notable shifts in the timing of the premiums being written.

Because obviously as you say aviation deductible is a fourth quarter. But do the teams that you've added elsewhere in the book, do they change that at all?

And then on Kinesis, you talked when we met in January, this about the potential improvement in the outlook and especially retro, but there has been comment about more of that come. Could you give us a bit more of a feel for what you are expecting through the rest of this year for Kinesis?

Thank you.

Hi Joanna, I think typically our first half of the year, we write about 63%, 64% of our book. And it kind of moves a little bit this year with the new lines of business and it'll still stay in that kind of 60% to 65% range for the first half going forward.

And obviously, with the aviation deductible team, that, that's a big Q4 renew that we didn't expect to see some more new business coming into the rest of the year.

Okay. Thank you.

Hi Joanna, it's Darren. Yes, we said we grew our AUM about 20%, we think as Paul touched on earlier.

We've seen good opportunities in respect of Kinesis. Underwrites, we've seen pricing up 7%.

We've actually taken a chance to derisk our portfolio a little bit. Regarding opportunities during the year.

We think there'd be a few. Hopefully the market keeps on the positive trend.

Florida will be a fascinating set. But we'll look to, if you like, deploy more capital.

if you see the opportunities during the year.

Just one, quick one for me please. On the fixed income portfolio.

Please could you just confirm the current reimbursement rate? Thank you.

Sure. Our market was about 3% right now.

So, one last question for me. Coming back to the dividend, obviously you've had to say to policy of the low base dividend and then the special.

Could you ever consider increasing the base dividend a bit and then bringing back the size of the specials that you pay out? And if not, could you explain a bit your philosophy behind your dividend policy?

Sure Joanna. I guess the approach to the ordinary dividend has always been to do a small amount so that we're in complete control of our capital.

I mean, arguably, we could increase a little bit that relate to have the and the ability to make a decision or special so and if we want to keep more capital for underwriting, then we're not tied down to a committed dividend at the moment.

Yes, Joanna, I think our current policy just gives us maximum flexibility and that's fairly what we like.

Okay, thank you. Thank you.

Hi, two questions please. First of all I'm not sure if I missed it what kind of grade did you achieve on the new business to form one and secondly can you talk about your insurance spending for 2019?

And is there any changes to the structure? Thank you.

So on, yes, on the first question that was asked, we talked about the RPIs of 1/1 across the portfolio. They're broadly in the mid-single-digit range, as in positive.

Specifically, with regard to the new business lines, in areas like onshore energy, we've seen rate increases in the double-digit range that market is starting to move but again coming from a very low base. In the power class, we've seen rate rises in the mid-single-digit ranges.

And in aviation deductible, albeit there's not a huge amount done at 1/1 but what we saw in Q4 was pricing improvements in a double-digit range. So on the 3 new classes of business, that's what we're currently seeing in the market.

I'm sorry what was the second question?

Insurance spend. So as Alex said, we've kind of broadly renewed our reinsurance program as well as a few changes around the hedges.

And if you expect to see reinsurance spend go up a bit next year given the new lines of business we've got. And the reinsurance support for those particular given the at least deductable as I mentioned significant closure on that.

Thank you.

Hi there. Just very quickly, I wonder if you could just give a bit of an update on what you're seeing in the offshore energy market?

Obviously, the oil price have come down a bit since the last quarter. Just wondered if you could update us on what levels of demand you're seeing as you're going into the April renewal season?

Thanks.

Hi Nick. I'll take that.

So you're right the oil price has reasonably volatile through '18. We are still seeing increases in demand from our clients.

And the tone from our clients remains more positive than it has been in recent years. Adjusting with the volatility, some of that demand coming through may take a little bit longer.

But we are seeing some of our clients going back to work to really more wells. It's just maybe a little bit slower given the recent volatility in oil price.

But the trend is positive, which is good. And then in terms of writing environment, the upstream energy market continues to be positive, its low-single-digit rate rises, which is a second year we're seeing that.

But that's effectively because we haven't seen any significant capacity lead the upstream energy market, but we are in demand increase incrementally. And as I've said, rates are slowly improving.

So it's a better story, but it's just a slow burn.

Okay. Thank you, everyone.

Thank you for dialing in. Thank you for your questions and we'll talk to you next quarter.