StubbleJumper

That is very interesting. That's some great optionality for FFH. At this stage, 8% isn't even an outrageous financing cost, so they can sit back for a few more years and see how the business goes at Ki and how the yield curve evolves, and then if both of those turn favourable, a redemption could make sense (or not!). SJ

In the insurance world, lots of bad things can happen. That's a fact of life. But, in this particular case, I don't think that Tammy looks like she will become a bad thing: https://www.nhc.noaa.gov/refresh/graphics_at5+shtml/115804.shtml?cone#contents SJ

There is quite often pressure on FFH's share price in September and October, which I tend to attribute to the market's fixation on hurricanes. But, the Q3 will be released shortly, and my guess is that the market will wake up. If you have any desire at all to add to your position, earlier this week might have been the best chance! SJ

I understand the sentiment, and I even bought a little more a couple of weeks ago. I should not have added a single penny to my FFH position because it was already larger than it should have been, but the prospects over the next couple of years are so compelling, that it strikes me as one of the more straightforward opportunities currently available. I am not at 50% like you, but rather more like 35%, which is already far too much from a basic risk management perspective. I would consider going higher yet, but we should never forget that Prem has come close to driving it into a wall on a couple of occasions. SJ

You need to read Note 5 in the Q2. Of that "billion," $358m are derivatives. As far as I am concerned, derivatives are not liquidity. I bemoaned this state of affairs back in August and suggested that FFH would benefit from floating another $500m or $750m of notes because the holdco could use the actual liquidity. They've pushed back the repurchase of Brit a bit, presumably because they don't want to burn more cash, and they've reduced the pace of common repurchases. So, either we will see an abnormally large divvy from the insurance subs in the midst of a very profitable hard market, or they'll float some debt, or? SJ

Really, to do that properly would require going back into the ARs and grabbing 10 or 20 years worth of CRs and stripping out the cat losses so that you calculate an average number of CR points lost to cats. Happily, FFH usually reports both the composite CR and a CR excluding cats. It's not an enormous task, but then you can use that average CR points of cat loss to help build a normalized earnings estimate. SJ

Well, that's true. If you were going to buy an asset today, over the life of the asset, you would want the expected return on that asset to exceed the expected cost of capital backing it. At first glance, FFH's balance sheet is replete with assets that return less than the cost of maintaining the preferred shares. But, there's one major problem with that: almost all of FFH's assets are held by its insurance subsidiaries. In fact FFH has tens-of-billions of dollars of sovereign debt that yields less than the cost of those prefs. However, that relatively low-yielding sovereign debt is required for the insurance subsidiaries' reserve requirements. The regulators will not allow FFH to just sell the treasuries and use the proceeds to retire more costly debt and preferred shares because the treasuries are effectively the guarantee that the company will pay indemnities to the policy holders. To the extent that the insurance subsidiaries currently have excess capital, FFH could liquidate some treasuries, use the proceeds to issue a dividend to the holding company, and then use that cash to redeem prefs or repay debt. However, as a general rule, when an insurance company is in the midst of a very profitable hard market and is trying to grow its book of business, you don't shed excess capital because it constrains your ability to grow. So, for 2024 and maybe 2025, I would not expect to see abnormally large dividends from FFH's insurance subs to the holdco. There may be some other marketable assets held by the holdco that do not yield ~10% pre-tax, but I can't think of many low-yielding assets that could be sold to redeem the prefs. If you want to buy the prefs, you do it because, beginning in 2025, they'll likely provide a nice tax-advantaged dividend of ~10% on today's market price. If you are lucky, the hard market will turn in 2025, FFH will shrink its books of business and at that point you might see some larger dividends to the holdco. But, even at that point, I doubt that redeeming the prefs will rank very highly on FFH's hierarchy of capital uses. SJ

Yes, those prefs are redeemable and not retractable. So, like all such prefs, that means that FFH can redeem them in situations that are attractive to the company. But, how do they redeem them? It requires cash at the holding company level to do so. What is the hierarchy of uses for cash (capital) available at the holdco? Well, FFH needs to use some cash: -to fund the holdco's operations, -pay the annual US$10/sh dividend -pay interest on the large holdco debt -perhaps it might wish to buy a new subsidiary (or a portion of a subsidiary), -it might want to repay some debt -it might want to add cash/capital to an insurance sub so that it can underwrite more business -or, as you said, it might want to redeem some or all of its outstanding preferreds. At the end of Q2 the holdco had about US$600m of cash and liquid securities available. It has an untapped US$2B revolving credit faciltiy. It could float more bonds/notes. It could consider sending larger dividends from its insurance subs to the holdco. But, however you look at it, the FFH holdco is not currently swimming in cash, nor is it likely to be swimming in cash during 2024. When considering its capital allocation for 2024, FFH will definitely look at all potential sources and uses of capital and rank them in a hierarchy. As you noted, they could get a ~10% pre-tax "return" by redeeming the series D and F. But, they could probably get an even higher return by repurchasing OMERS' minority position in Odyssey Re. They could probably get a better return by repurchasing the common shares at the current valuation of ~1x BV. In short, there are many places where they can obtain a similar return to redeeming the prefs. Given the many possible uses of cash/capital, I don't expect to see a penny dedicated to redeeming prefs during 2024 or 2025. In fact, as a common shareholder, I would be furious if they redeem those prefs for $25/sh during 2024 or 2025 when they can simply make open market purchases under the NCIB right now at a significant discount to the redemption price. SJ

When they write policies in Indonesia or Brazil, they are not doing so from headquarters in Toronto! It is almost always a local subsidiary that does the underwriting in those countries. In general, those local subsidiaries have been in operation for many years (decades!) and know the situation on the ground very well. FFH has bought several of those insurance companies around the world. There is an argument that owning several foreign subs might make you actually sleep better. Something bad might happen in Indonesia, but if that occurs, it's unlikely to be accompanied simultaneously by bad news in South Africa, Brazil or Singapore. The international subs are pretty geographically diverse. SJ

The prefs are great for certain people. If you are a Canadian tax filer with a modest taxable income, in certain circumstances, you might end up paying no income tax at all on the ~10% dividend, which makes for a pretty attractive net return. And then if interest rates should happen to decrease, you could also be in line for a modest capital gain to top things off. So, they are definitely worth looking at, especially for a particular subset of Canadian taxpayers. The prefs do, however, have a few issues. The market is dominated by unsophisticated retail investors so when the market gets a little choppy, the prefs can experience irrational price swings. If you happen to need to repatriate your capital during one of those irrational periods, you could face a capital loss. Secondly, the dividends reset every five years, so the double-digit return might be time limited if interest rates decline. Thirdly, a foreigner will be subject to a considerable withholding tax on the dividends, unless Canada has a tax treaty with the foreign country that might reduce the withholding tax. Fourthly, the prospectus for the prefs allows FFH to redeem them when it is attractive for the company, and those situations are generally not attractive for the investor, but there is no retraction provision allowing the investor to retract them with conditions are favourable for the investor (and unfavourable for FFH). Finally, as with all prefs, you are subject to risk of financial failure by FFH and you might not be adequately compensated for that risk because your upside is capped with a pref (Let's be honest with ourselves. Prem seems comfortable with significant financial leverage and has come close to driving FFH into a wall on a couple of occasions). A Canadian investor looking to exploit our income tax provisions for dividends paid by Canadian Controlled Private Corporations might look at FFH prefs and be attracted at this stage. But he should equally be looking at the common shares of our chartered banks, as outfits like the Canadian Imperial Bank of Commerce and the Bank of Nova Scotia currently sport 7% dividend yields and those divvies are bumped up a shade twice per year. At the end of five years (the FFH reset period) it is likely that the yield on purchase price for one of those banks would be pretty similar to the 10% yield on the FFH prefs. And those banks are the most liquid of Canadian equities and face virtually no risk of financial failure by the underlying company. At this point, the prospects for FFH common shares over the next few years are so attractive that someone who doesn't have a specific income tax motivation would probably just buy the common instead of the FFH prefs. A foreigner with no income tax advantage would almost certainly buy the common.... SJ

It's absolutely an asymmetric bet. Anyone can take @Viking's forecasts for the current year and the next two and develop optimistic, pessimistic and mid-point scenarios for BV on Dec 31, 2025. Even if you give a haircut those forecasts out of an abundance of caution to create a pessimistic scenario, it's hard to envision a scenario where BV isn't US$1,100 by year-end 2025. With last week's market price of ~US$850, a buyer last week would have a perfectly nice return over the next couple of years without any P/BV expansion at all, and that's based on a somewhat pessimistic scenario that applies a modest haircut to @Viking's forecasts. If get a bit braver and ignore the desire for an abundance of caution and accept @Viking's forecasts as they've been presented, it's even better. And then if you get really, really ballsy and dream about an outrageous P/BV of 1.1 on Dec 31, 2025 you get an outstanding return. You don't need 1.3x or 1.4x BV to get a great result over the next couple of years from an investment today. So yeah. Asymmetric is exactly the right description. If things go slightly poorly, you get a perfectly acceptable return, and if the moons and stars are even slightly aligned it could be considerably better SJ

That's what's really fascinating. If you think back to the spirited discussion on this board in February, the debate was whether FFH had pushed out its duration sufficiently. Some board participants were satisfied with the modest increase in duration but some were disappointed that it hadn't been pushed out 3 or 4 years. Well, perversely, we were all sorta wrong! A better return would have been available by keeping the portfolio in a short duration! However, I still like the risk management aspect of having pushed it out like what FFH has done. They will capture some upside as they roll the maturing securities but there is no major downside for the next couple of years SJ

Confession: I purchased more FFH today. After bitching and complaining about FFH's poor risk management decisions with respect to position sizing (ie, the "hedging" derivatives, Blackberry, etc), I have committed the same sin. After the rise in the share price over the past few years, I should be looking at the position size and trimming my FFH position. Instead, today I added. What could possibly go wrong? SJ

Well, when you buy insurance, what are you buying? You aren't insuring for the cost of buying a replacement building on the commercial real estate market. You are insuring for the cost of repairing the existing building, or in the worst case, rebuilding it. The cost to rebuild can be much higher or much lower than the prevailing market price for a similar existing building. The interesting thing that actually has happened is that repair and rebuild prices have both gone up substantially due to inflation, so premium must follow.... SJ

Thank you for sharing your thought process. Don't worry about being wrong, as it's impossible to be precisely right. The quarterly report gives a breakdown of the fixed income portfolio broken down by ranges of maturity, but even with those breakdowns it's still not possible to take an aging of accounts approach because there is undoubtedly a great deal of churn within the fixed income port during a year (eg, sell a whackload of 5-yr and use the proceeds to buy 2-yr, then turn around and sell a whackload of 2-yr and use the proceeds to buy 10-yr). The approach you've taken gets you to the right neighbourhood for interest income, and that's probably good enough, particularly for 2025 when the level of uncertainty grows. Higher for longer would definitely be a major boon for FFH if they keep the duration relatively short. I do wonder, however, whether they aren't looking at the 5-yr these days and contemplating a slight increase in duration. Then again, I was the guy who suggested in Feb 2022 that the 2-yr looked like a bit of a sweet spot, and if FFH had held that same view, it would have cost a pile of interest income. In fact, in 2023, FFH would have been better off to shorten duration rather than lengthen it! All of our collective hand-wringing in Feb 2023 about whether duration should be 2, 2.5 or 3 years has been entirely directionally wrong! I don't think that we will see a wholesale move into corporates unless all hell breaks loose in credit markets. FFH tends to be pretty rational about when to reach for yield and when to stick to sovereign debt. In short, they don't tend to buy risky bonds unless they are getting adequately paid to do so. I don't think a spread of 1% or 2% is anywhere close to enough to trigger a shift into risky bonds. On the other hand, if all hell does break loose in credit markets and the market does begin paying for risk, that will be the time when FFH becomes opportunistic and we will see more corporates, and, in particular, more bond/warrant deals. Keep your fingers crossed for another couple years of favourable underwriting conditions AND favourable movement in fixed income markets. It's a remarkable set of conditions! SJ

Irish American? SJ

Funny story about my most recent FFH two-bagger. As everybody knows, in late 2021 FFH initiated a substantial issuer bid which ultimately was priced at US$500/sh. Wanting to do a little low risk arbitrage, I reorganized a pile of assets in my tax-advantaged accounts and loaded up on FFH at ~US$450/sh and then tendered the whole works. To my great surprise, the tender offer was over-subscribed and I was prorated, with only 90% of my tender being accepted. As it worked out, tendering 90% of those shares at US$500 gave me a full return of the capital that I had used to buy 100% of the shares at US$450. My intention was to unload the 10% extra shares some time in early 2022 as I already owned a boat-load of FFH prior to the tender announcement. Well, what does Buffett say about investing? It requires long periods of inactivity bordering on sloth. And sometimes it also involves a wee bit of neglect, sloppiness and other forms of inattention. I never did get around to selling those 10% of shares that were not accepted in the tender. Nearly two years later, those surplus shares are perilously close to becoming a two-bagger. Good thing for me that the SIB ended up being oversubscribed and that I got busy in early 2022 and failed to sell the excess shares. Sometimes it's better to be lucky instead of good. SJ

@Viking There's nothing particularly wrong with your earnings estimates for the current year and the next two. A guy could quibble with an assumption or two and shave 10 bucks per share off or add 10 bucks on, but really that doesn't much change the story. The difference between your two-year forecast and what @Munger_Disciple posted is that you have developed a pro forma forecast for 2024 and 2025 based on your current best estimate of operating conditions for those two years, while he seems to have developed an estimate of normalized earnings, meaning an average earnings level that could reasonably be obtained over the course of an entire insurance cycle (you used the term normalized earnings differently back in January, but typical usage is to essentially average out earnings over a cycle for companies operating in a cyclical industry). You will note that @Munger_Disciple's financing differential (the fixed income return minus cost/benefit of float) is about 4.5% which is what one might expect over a lengthy period. The advantage of normalizing earnings is that it does enable you to take a mental short-cut and slap a PE ratio on the result. So, the outcome of that thought process suggests that FFH is currently selling at roughly 10x normalized earnings, and those normalized earnings will experience growth over time. In short, that metric shows that FFH is currently cheap without all of the noise associated with the temporary unusual market conditions that currently offer the company an 11% financing differential (ie, ignore the silly current year PE multiples of 5 or 6 or whatever because they is not sustainable over a cycle, and PE analysis assumes long term cash flows). As I have suggested in the past, over the shorter term, your earnings estimates are more useful to evaluate short-term cheapness. Take current adjusted-BV, tack on your earnings estimates for the next couple of years, subtract off the $10 divvies and you'll have a decent estimate of adjusted-BV as at Dec 31 2025. Slap your preferred p/BV ratio on the result and, voila, you suddenly have a plausible stock price forecast going out two years. If you are conservative like me, you might hair-cut the earnings for 2024 a bit and 2025 a bit more out of an abundance of caution, and you might be circumspect about your p/BV ratio (ie, do you select 1.0x or do you go all out and declare that its worth 1.5x?). But, based on the current stock price and a reasonable estimate of accumulated earnings over the next couple of years, FFH appears to be cheap. Ten years from now, we might end up looking back and declaring that FFH wasn't just cheap in Sept 2023, but that it was outrageously cheap in retrospect. I am willing to run that risk of retrospectively declaring it outrageously cheap and regretting that I didn't choose a larger position size. But, on a prospective basis, I am unwilling to declare it outrageously cheap because the other side of the insurance cycle will eventually come and sizing up my position beyond where it currently sits is an enormously risky thing in that context (ie, if something is outrageously cheap and one is relatively certain about that analysis, what does the Kelly Criterion instruct us to do?). Anyway, on this board, we are all very likely to make a pile of money from FFH over the next few years and our preoccupation during 2023 has been arguing about precisely how large our winnings will be... SJ

You are right. The basic math above was about the roe you might expect from one of the insurance subs. For the corp as a whole, you need to add in the return from other non insurance assets held by the hold co, and then strip off interest, taxes and Holdco admin costs. It is worthwhile looking at the table depicting growth in BV that Prem publishes every year the annual letter. Hitting 15%+ is a notable event. We will probably get three or four of those types of years in rapid succession, so we should be pleased about what we see. But people should project that forward over many years at their own risk and péril! SJ

No, the math is what it is. The long-term financing differential (ie long bond rate minus the cost of float) is a shade over 4 percent. So if you hypothesize a 0 percent cost of float you should be thinking about a 4 percent treasury bond rate. If you have 25 percent equities that return 10 pct and 75 pct fixed income, your float yields 0.75x4 + 0.25x10 = 5.5 pct. Lever it up by 2 assuming that your premiums to surplus ratio is that high (usually ffh runs it lower) and your insurance subs might get an roe as high as 11 pct if they jettison excess capital. Ffh's subs usually carry more capital, so drop your expectation accordingly. The investment thesis is really that they will generate some alpha on the investment side. SJ

Sure, but the traditional thesis for investing in FFH is that you'd hope that their equity returns would be a little higher than 5-10%. The constraint on what this can actually do for a shareholder is that, by necessity, an insurance company keeps two-thirds or three-quarters of its portfolio in fixed income. So, in the case of FFH, they currently have about US$12.5 billion in common stocks and associates. A 10% return on that would be $1.25b, or about $50 or $60/sh. It definitely helps, but the 15% ROE is a big hurdle over the long term (just look at the table that Prem publishes in his letter every year). SJ

I'm not Pete, but I'll take a run at this. If you want to value a security using PE as a metric, you need to do so on the assumption that earnings are neither unusually high nor unusually low and that they are sustainable for a prolonged period. A PE is essentially a mental short-cut for assessing the value of a perpetuity. To make the argument that a 5.2 PE is cheap and that the company should have a PE of, say, 12, you need to assume that the current excellent operating conditions for an insurance company will persist for many years on end. To do this, you need to argue that FFH has some sort of special sauce that enables it to write a 94 CR while buying US treasuries yielding 5%, but nobody else can/will do so. So, in essence, the argument needs to be that $1 of capital in Crum or Odyssey can be used to write $2 of premium, the underwriting earnings will be 12 cents (94 CR) and riskless investment income will be 10 cents (a US Treasury yielding 5%), providing a slick return of 22% on that equity, BUT no other company can replicate that. No other company will see this, obtain new capital, expand their book of business, and competition will not push the CR rate up and squeeze FFH's books of business. If you can hammer out this argument in your own mind why FFH can do this and nobody else can/will, then your earnings are sustainable and you can simply slap some sort of market average PE onto current earnings to arrive at a valuation estimate. Setting aside the argument about the sustainability of earnings, the comment saying, "And I think the stock looks fairly cheap on that basis" is in my view a reasonable and valid comment. You have quite rightly pointed out that FFH has locked in some fairly attractive investment returns for the next few years. You've done the arithmetic through to develop pro forma earnings estimates going forward 2.5 years and shown that there will be big earnings coming down the pipe, even if a guy gives a moderate haircut to underwriting profitability for 2024 and a massive haircut to underwriting profitability for 2025 (but, hey if they actually continue to write a 94 CR, so much the better!). If you do this, it is difficult to envisage a scenario where adjusted BV (after accounting for the excess of market over book for certain associates) doesn't hit $1,100 by Dec 31, 2025. If operating conditions in the insurance market continue to be as wonderful as they currently are, with a CR of 94 and a treasury of 5% being SIMULTANEOUSLY available, that Dec 2025 BV could be higher, but it seems to be a no-brainer that they'll make the $1,100 BV given that the returns on the fixed income portfolio are largely locked in. So, someone who doesn't buy the argument that FFH ought to currently trade at PE12x$180EPS=US$2,000+ can quite reasonably believe that it could trade at somewhere between 1x and 1.2x BV on Dec 31, 2025. With the shares currently trading at ~US$830, a price on Dec 31, 2025 of $1,100 to $1,300 is quite plausible and is fully consistent with the observation, "And I think the stock looks fairly cheap on that basis." It really amounts to a bit of a differing view of just how far into the future you are comfortable to predict outstanding insurance results. I am assuming that we are at the peak of the insurance cycle and that conditions will deteriorate as capital enters the industry and companies competing to expand their books of business push the CRs higher (probably to slightly above 100 before it's all said and done). If it actually does work out that FFH can routinely obtain a 22% return on an incremental dollar of capital, so much the better. But, personally, I am unwilling to assume that today's wonderful insurance conditions will persist for a prolonged period. I would be happy in 10 years if I am wrong today! SJ

I don't really mind them putting a few bucks into the S&P index, but the more worrisome possibility is that this investment might have been paired against a short (ie, go long S&P while simultaneously shorting some stock that you hate). SJ

@UK That is quite interesting. I knew that BRK was concerned that Geico had not been keeping up with Progressive, but I would not have guessed that BRK's benefit of float including GenRe had been trending downward for a decade.

I believe that I likely expressed more disdain than anyone for Prem's comment in the 2018 annual letter. My argument at the time was that for most of 20 years, FFH had been chronically short of capital and, nonetheless, had chronically acquired both insurance and non-insurance subsidiaries. It did this by issuing large amounts of debt and by repetitively increasing its share count. My argument at the time was that, as a serial acquirer, Prem would be unable to make a meaningful reduction in the share count because the capital/cash at the holding company level required to do so would never be there because there would always be another business to buy. Well, I was wrong....mostly. FFH has meaningfully reduced its share count since 2018, and it was mainly done in a very rational and opportunistic manner. The largest buybacks were conducted at objectively significant discounts to any reasonable notion of FFH's fair intrinsic value. But, how was it done? Well, it was done principally by increasing FFH's corporate debt-level, selling subsidiaries (Riverstone and Pet Health), and by issuing what I consider to be "quasi-debt," which are the recurring transactions with partners like OMERS where FFH "sells" part of an asset and then "repurchases" it a few years later at a price that always seems to give the partner a predetermined 8-10% return. Effectively, the share repurchases and the operations of the holdco have been largely financed by issuing debt (including quasi-debt) and selling assets. I don't have a particular problem with that, provided that the terms that FFH receives for the sale of its subsidiaries and for the issuance of debt are broadly acceptable, and if FFH is being rational and opportunistic about its buyback prices. The strategy of continuing to lever up after the 2018 letter has mostly worked out very well, mainly because the asset side of the balance sheet has exploded over the past two years. Having said that, the risk of that strategy became palpable during the first wave of covid (Q2 2020) as M2M losses on equities and corporate bonds and covid cat losses pushed the company uncomfortably close to its debt ceiling as defined by the revolving credit facility's debt covenants, and debt markets dried up which impeded FFH's ability to float bonds as an alternative to using the revolver. In the end, it worked out, but in Q2 2020 it was not at all obvious how FFH would fund its operations if equity markets were to continue to decline and/or covid cat losses grew appreciably. This sort of situation is the potential downside of levering up and leaving yourself reliant on bank credit (ie, a revolver). I can happily say that FFH's share repurchases to date have been an unmitigated success. The prices paid were such a significant discount to book that it's hard to envision a scenario where the decision could be declared a failure, ex post. That being said @Viking, there is a line missing from the table analysing the buyback profitability, and that line is cost of financing the repurchases. That line item would include the cost of "dividends" that Odyssey is paying to OMERS and the ultimate cost of "repurchasing" the Odyssey position (it will be "bought back" by FFH in 5 or 6 years, at a price that will guarantee OMERS it's 8-10% return, right?) and the cost of maintaining the TRS. If the Odyssey quasi-debt is repaid in a relatively short period, the fall 2022 repurchase will be an overwhelming success as the discount was so large it will easily exceed any cost of financing, but if the quasi-debt languishes for a prolonged period the analysis might be a bit more ambiguous (8-10% per year for a decade or more would be a little painful). Similarly, if the TRS continue to increase in value at a pace that drastically outstrips the cost of the swap, it will be an unambiguous win for FFH, but if the share price growth should flatten (or, gasp, go negative!) and FFH continues to pay the juice for a number of years the outcome could become less obvious. In any event, the odds are overwhelmingly in favour of this working out very well for shareholders over the long-term, but always keep in mind that financing was not free and it was not without risk. All of this brings us to today. The FFH holdco is once again a little light on cash and management seems to understand that large dividends from the insurance subs during a hard market might be undesirable because it could impede growing the subs' books during the virtuous part of the insurance cycle when both underwriting and investments are providing strong returns. Buybacks slowed to $80m during the first 6 months of 2023, likely because the holdco had limited cash available. The company has pushed out the "repurchase" of the minority position in Allied for a few years to give itself time to make a pile of money before it ultimately shrinks its books of business (it bought back 0.5% for $30.6m so repurchasing the remaining 16.6% will require about $1B of cash). As much as I don't like seeing FFH increase its debt load, I would say it's probably time that they float some bonds to fund the holdco's operations for a little while. If they can fund the holdco's requirements for the next couple of years until the hard market is over, FFH will make a pile of money and can spend the 2026-28 period releasing a few billion dollars of excess capital from the subs to "repurchase" some of the outstanding minority positions and possibly complete the share buyback that was initiated through the TRS position. They have made some pretty large moves over the past couple of years that are not yet fully digested. SJ